1 / 34

Lecture 1: Trade and Labour

Lecture 1: Trade and Labour. H. Vandenbussche. Research questions. Link between imports from low-wage countries and firm-level employment growth? Link between imports from low-wage countries and firm-level skill-upgrading?. Theory: « Old »  Trade Theory.

Download Presentation

Lecture 1: Trade and Labour

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Lecture 1: Trade and Labour H. Vandenbussche

  2. Research questions • Link between imports from low-wage countries and firm-level employment growth? • Link between imports from low-wage countries and firm-level skill-upgrading?

  3. Theory: « Old »  Trade Theory • Explains why countries trade in DIFFERENT products MACHINES CHINA EU TEXTILES

  4. 3. « Old » Trade Theory K:Capital EU Machines CHINA Textiles L: Labour

  5. « New » Trade Theory • Explains why countries can trade in SAME products but with DIFFERENT factor intensities TEXILES CHINA EU TEXTILES

  6. « New » Trade theory K: Capital EU High quality Textiles CHINA Low quality Textiles L:Labour

  7. Hypothesis • Based on endowment theory we expect firms’ employment growth to decrease with exposure to low wage import competition • Firm capital and skill intensity increase employment growth more in industries with low wage import competition

  8. Bernard et al. for US plants

  9. Conclusion • Low wage imports negatively affect employment growth of large firms • capital intensive firms suffer less from low imports in terms of employment growth • No significant result for skill effects • Endogeneity of industry level imports is accounted for using tariff rates

  10. Biscourp and Kramarz for France • Distinguish between intermediate imports and imports of finished goods Definitions: finished good: when imported good coincides with that of importing firm (~outsourcing) intermediate good: when imported good is different from that of importing firm • Include firm-level measures of innovation to control for skill biased technological change

  11. Trade and Employment growth

  12. Trade and Unskilled workers

  13. Conclusion • Low wage countries do not have the negative role often described in the press • Firms importing finished goods (~outsourcing) destroy more jobs than those importing intermediates conditional on changes in local purchases • Exporting positively affects employment growth • Results are robust to inclusion of technology variables (Bloom et al) • But! No controlling for endogeneity of imports and exports

  14. New event! • The importance of China since nineties may alter results • China’s exports features some overlap with production structures in developed countries • i.e. its effect may be more nefast on employment growth but may offer opportunities for skill upgrading

  15. Hypothesis 1: Imports from China negatively affect firm employment growth • Hypothesis 2: Imports from China result in skill upgrading in developed countries

  16. Imports from China, firm growth and survival and skill upgrading: Evidence from Belgium G. Mion (LSE), H. Vandenbussche (UCL), L. Zhu (Kul)

  17. Data • ’96-2006 • Education as a measure of skill at the firm-level allows within firm skill upgrading • Firm-level measure of outsourcing • Distinction between final and intermediate imports • Methodology • We distinguish China from other low wage countries • Instruments for Trade (tariffs and exchange rates) • Controls for innovation • Notes

  18. Stylized facts: (1) Declining manufacturing employment

  19. Stylized facts: (2) Increasing share of non-production workers

  20. Stylized facts: (3) More skilled labour force in manufacturing

  21. Stylized facts: (4) Rising manufacturing imports from China and other low-wage countries

  22. Literature: • Schott (2008) showed that China’s export similarity with OECD countries is higher than that of other non-OECD countries and this similarity is growing much faster than any other countries. • This finding highlights that firms in developed countries are much likely to face competition from Chinese exports rather than that from other low-wage countries' exports, since the later have much less similarity with their productions.

  23. Trade variables: -Industry-levl import share -Firm-level outsourcing of finished goods -Firm-level outsourcing of intermediate goods (similarly defined) Firm characteristics: -Size (log empl.) -Average wage (wage bill/empl.) -Labor productivity(value added/empl.) -Capital intensity (tfa/empl.) -Intangible capital intensity (itfa/empl.) Data: main variables used

  24. Trade and employment change (BJS, 2006) • Econometric model: =firm characteristics: size, labor productivity, capital intensity, intangible capital intensity and average wage =industry-level import share of different country groups =firm-level outsourcing to different country groups (finished and intermediate) =time fixed effects =firm fixed effects

  25. Table 2: trade and employment growthOLS IV industry IV industry and IV firm

  26. Table 3: trade and share of production workersOLS IV industry IV industry and IV firm-level trade

  27. Table 4: trade and skilled workersOLS IV industry IV industry and IV firm-level

  28. How much can Chinese imports explain skill upgrading? • Chinese imports alone can explain around 30% of the total skill upgrading in Belgian manufacturing during the period of 1996-2006

  29. Trade and firm death • We estimate a linear probability model: • Whear Death is a dummy variable denoting firm death. We defined a firm as dead if it disappears from the data set in the next year or for the next two years.

  30. Table 5: Trade and firm death (1)

  31. Table 6: Trade and firm death (2)

  32. Conclusions • Imports from low-wage countries are important in explaining employment growth in Belgian manufacturing • imports from China play more important role than that from other low-wage countries. • Firm-level outsourcing to China leads firms to upgrade their occupational composition of employment, although it does not affect the level of employment significantly. • Import competition from low-wage countries/China only has weak impact on firm death

More Related