Trade Liberalization, Firm Performance, and Labor Market Outcomes in the Developing World : What Can We Learn from Micro-Level Data?

reviews the micro-level evidence on the effects of trade and investment liberalization in the developing world. He focuses, in particular, on the effects of the 1991 trade reform in India since it provides an excellent controlled experiment in which the effects of a drastic trade regime change can be measured. His main findings are: 1) There is evidence of trade-induced productivity gains (in this respect, however, India is an exception. 2) These gains mainly stem from intra-industry reallocation of resources among firms with different productivity levels. 3) The gains are larger in import-competing sectors. 4) There is no evidence of significant scale efficiency gains. Unilateral trade liberalization is often associated with a reduced scale efficiency. 5) There is evidence of a pro-competitive effect of trade liberalization. 6) There is no evidence either of learning-by-exporting effects or of beneficial spillover effects from foreign-owned to local firms active in the same sectors. 7) There is evidence, however, of positive vertical spillovers from foreign direct investment. 8) There is evidence of skill upgrading induced either by technology imports or by trade-induced reallocations of market shares in favor of plants with higher skill-intensity. 9) There is no evidence of trade-induced increases in labor demand elasticities. But direct evidence suggests that trade exposure raises wage volatility. 10) There is no evidence of substantial employment contraction in import-competing sectors.

Bibliographic Details

Main Author:	Epifani, Paolo
Language:	English en_US
Published:	World Bank, Washington, DC 2003-05
Subjects:	AGGREGATE DEMAND, ALLOCATIVE EFFICIENCY, AVERAGE PRODUCTIVITY, BILATERAL TARIFF, CAPACITY BUILDING, CAPITAL GOODS, CAPITAL STOCK, CAPITAL-OUTPUT RATIO, COMPARATIVE ADVANTAGE, COMPETITIVE MARKETS, CONSUMER PRICES, DEMAND CURVE, DEMAND ELASTICITIES, DEMAND ELASTICITY, DEVELOPED COUNTRIES, DEVELOPMENT, DIVISION OF LABOR, DOMESTIC FIRMS, DOMESTIC INDUSTRY, DOMESTIC MARKET, DOMESTIC PRODUCERS, DOMESTIC PRODUCTION, DYNAMIC EFFECTS, ELASTICITIES, ELASTICITY, ELASTICITY OF SUBSTITUTION, EMPIRICAL ANALYSIS, EMPIRICAL EVIDENCE, EMPIRICAL STUDIES, EMPLOYMENT, EQUILIBRIUM, EXPENDITURES, EXPLOITATION, EXPORTERS, EXTERNALITIES, FIXED COSTS, FOREIGN COMPETITION, FOREIGN DIRECT INVESTMENT, FOREIGN FIRMS, FOREIGN INVESTMENT, FOREIGN MARKET, FOREIGN MARKETS, FOREIGN STANDARDS, FOREIGN TARIFF, FREE ENTRY, FREE TRADE, FULL EMPLOYMENT, GROWTH RATE, HUMAN CAPITAL, IMPACT OF TRADE, IMPACT OF TRADE LIBERALIZATION, IMPERFECT COMPETITION, IMPORT COMPETITION, IMPORT PENETRATION, IMPORT-COMPETING SECTORS, IMPORTS, INCOME, INCOME INEQUALITY, INCREASING COMPETITION, INCREASING RETURNS, INCREASING RETURNS TO SCALE, INDUSTRIAL EXPANSION, INDUSTRIAL RESTRUCTURING, INDUSTRIALIZATION, INTERMEDIATE INPUTS, INTERNATIONAL COMPETITION, INVESTMENT LIBERALIZATION, KNOWLEDGE DIFFUSION, KNOWLEDGE SPILLOVERS, LABOR MARKET, LABOR MARKET OUTCOMES, LOCAL FIRMS, MARGINAL COST, MARGINAL COSTS, MARGINAL REVENUE, MARKET POWER, MARKET SHARE, MARKET SHARES, MARKET STRUCTURE, MEASURE OF TRADE, NORMAL PROFITS, PER CAPITA INCOME, PRICE INDEX, PRODUCERS, PRODUCTION FUNCTION, PRODUCTION TECHNOLOGY, PRODUCTIVITY, PRODUCTIVITY GROWTH, PROFIT MAXIMIZATION, RATE OF INNOVATION, REDUCTION IN TARIFFS, RETURN ON CAPITAL, RETURNS TO SCALE, SCALE ECONOMIES, SCALE EFFECTS, SPECIALIZATION, STATIC EFFECTS, TARIFF PROTECTION, TARIFF RATES, TARIFF REDUCTIONS, TECHNICAL CHANGE, TECHNICAL PROGRESS, TECHNOLOGY DIFFUSION, TECHNOLOGY TRANSFERS, TOTAL OUTPUT, TRADE, TRADE AGREEMENT, TRADE COSTS, TRADE EFFECTS, TRADE INTEGRATION, TRADE LIBERALIZATION, TRADE LIBERALIZING, TRADE MODELS, TRADE POLICY, TRADE PROTECTION, TRADE REFORM, TRADE REFORMS, TRADE REGIME, TRADE THEORY, UNEMPLOYMENT, UNILATERAL TRADE, UNILATERAL TRADE LIBERALIZATION, UTILITY FUNCTION, VALUE OF OUTPUT, WAGE INEQUALITY, WAGES, WELFARE GAINS TRADE LIBERALIZATION, SMALL & MEDIUM SCALE ENTERPRISES, LABOR MARKET CHARACTERISTICS, INVESTMENT OPERATIONS, REALLOCATION OF FUNDS, RESOURCES MOBILIZATION, RESOURCES UTILIZATION, IMPORT LIBERALIZATION, COMPETITIVENESS, SPILLOVER EFFECTS, FOREIGN DIRECT INVESTMENTS, LABOR DEMAND, ELASTICITY OF DEMAND, WAGE RATE, WELFARE GAINS,
Online Access:	http://documents.worldbank.org/curated/en/2003/05/2378823/trade-liberalization-firm-performance-labor-market-outcomes-developing-world-can-learn-micro-level-data https://hdl.handle.net/10986/18220
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