Import competition from and offshoring to low-income countries: Implications for employment and wages at U.S. domestic manufacturers

Using confidential linked firm-level trade transactions and census data between 1997 and 2012, we provide new evidence on how American firms without foreign affiliates adjust employment and wages as they adapt to import competition from low-income countries. We provide stylized facts on the input sourcing strategies of these domestic firms, contrasting them with multinationals operating in the same industry. We then investigate how changes in firm input purchases from low-income countries as well as domestic market import penetration from these sources are correlated with changes in employment and wages at surviving domestic firms. Greater offshoring by domestic firms from low-income countries correlates with larger declines in manufacturing employment and in the average production workers’ wage. Given the negative association, however, the estimated magnitudes are small, even for a narrow measure of offshoring that includes only intermediate goods. Import penetration of U.S. markets from these sources is associated with relatively larger changes in employment for arm’s length importing firms, but has no significant correlation with employment changes at firms that do not trade. Given differences in the degree of both offshoring and import penetration, we find substantial variation across industries in the magnitude of changes associated with low-income country imports.     

Robotics technology and firm-level employment adjustment in Japan

Unlike studies that analyze the impact of robotics technology on overall employment at the industry or firm level, this study investigated cross-division employment adjustment within a firm in an industry with greater diffusion and penetration of robotics technology. By examining changes in the composition of employment, we measured job creation and destruction at the division level and explored whether robotics technology, as a leading example of automation, not only displaces workers but also introduces new jobs in favor of labor. We made use of unique, division-level employment data for Japan’s manufacturing firms, together with industry-level data on the installation of industrial robots. We found that industry-level adoption of robots positively affects the firm-level job creation rate and the job destruction rate. Because the magnitude of the impact is larger for job destruction, robot adoption has an overall negative impact on firms’ net employment growth. Our findings suggest that the labor displacement effect of robotics technology and the emergence of new jobs due to technological change coexist even at the firm level.     

Minimum Wages and the Card-Krueger Paradox

An apparent paradox perceived by Card and Krueger concerning the relationship between minimum wages, employment, and output prices is resolved by revisiting the economics of minimum wages to show that under monopsonistic conditions in the labor market and competitive price-taking in the market for output, increases in both firm-level and industry employment are compatible with increases in output prices.     

Foreign direct investment and firm performance: an empirical analysis of Italian firms

Both empirical and theoretical literature show that multinational firms exhibit a competitive advantage before investing abroad. However, there are no clear empirical results regarding the ex post effects of foreign direct investment (FDI) on firm performance, partially due to the inadequacy of available firm-level data. We build a brand new firm-level dataset able both to represent the extent of Italian firms’ foreign activity and to provide reliable measures of key performance indicators, especially total factor productivity (TFP) and employment. We then use a propensity score matching procedure to analyze the causal relationship between FDI and firm performance. Firms investing abroad for the very first time, especially in advanced economies, show higher productivity and employment dynamics in the years following the investment: the average positive effect on TFP is driven by new multinationals operating in specialized and high-tech sectors, while the positive employment gains are explained by an increase of the white collar component. On average there are no negative effects on the parent firm’s blue collar component.     

Trade and employment in Vietnam: how firms' trade matters

This paper aims to analyse how employment and wages change when a firm's trade status is altered. Using a detailed firm-level dataset of Vietnamese manufacturing enterprises, the study finds that how firms trade matters for firm employment and wages in Vietnam. The average effect of one-way trading (exporting or importing) is positive for both firms' total employment and female employment. Direct trading activities are associated with a higher level of employment than indirect trading activities by firms. The female employment effect of direct exports is nearly three times higher than direct imports. Indirect imports hurt firms' total employment and female employment. Both direct and indirect two-way traders experience higher growth in firm employment than direct-only traders. However, it is interesting to note that indirect two-way trading activities have a positive impact on female employment. Furthermore, the commencement of direct import is also associated with greater labour cost advantage.     

The effect of foreign competition on UK employment and wages: Evidence from firm-level panel data

The Effect of Foreign Competition on UK Employment and Wages: Evidence from Firm-Level Panel Data. —This paper contributes to the sparse empirical literature on the effects of foreign competition on domestic employment and wages. The authors estimate a structural labour demand equation on UK firm-level panel data between 1982 and 1989 and several wage equations. When they restrict the sample to the manufacturing sector only, they find for the unionized firms that foreign competition has a negative effect on both wages and on employment. However, when UK manufacturing firms face only a few rivals, foreign competition has a positive effect on wages, but no effect on employment.     

Does immigrant employment matter for export sales? Evidence from Denmark

Immigration impacts on the economy in ample ways: it affects growth, wages and total factor productivity. This study deals with the effects of immigration on firm exports. Can firms benefit from hiring immigrants to expand their export sales? Or do immigrants who live in the firm’s region affect trade? In contrast to the existing literature, we are able to distinguish these two distinct channels. Using matched employer-employee data from Denmark for the years 1995–2005, we provide novel insights in the nexus between exports and immigration. We further contribute to the literature by providing first evidence on the adjustment of firms’ product portfolio in response to immigration. Our empirical results are consistent with the claim that immigration lowers barriers to trade. Both, regional immigration and foreign employment matter for the composition of firm-level exports. As a novel insight, our findings suggest that firms benefit from immigration in terms of expanded export sales, when they hire foreign employees. We only find weak evidence for the local presence of foreigners to increase export sales, which we ascribe to the conjecture that at least some trade-cost reducing forces of immigration like for example intercultural knowledge or personal and business networks abroad, can only be accessed or exploited via foreign employment.     

On the determinants of bonuses and basic wages in large Japanese firms

The profit-sharing model has attracted considerable attention as a hypothesis to explain wage flexibility and employment stability in Japan. This paper presents an alternative explanation of how bonuses and basic wages are determined in Japan, based on the efficiency wage hypothesis. In particular, we focus on the aspect that bonuses are paid to compensate employees for the intensity of work experienced during the last period, and basic wages are affected mainly by labor market conditions and are not firm-specific. We compare the two models, testing them for both industry aggregate data and firm microdata.     

Evaluating public sector sponsored training in East Germany

Support of training has been a very important instrument ofactive labor market policy in East Germany. This paper attemptsan evaluation of the employment and wage effects of trainingsupported by public income maintenance outside of a firm. Afterdescribing the labor market developments in East Germany, weillustrate the evaluation problem. Then, we estimate a simultaneousmodel for participation in training, employment, and wages.Taking account of selection effects before participation, ourfindings mostly suggest positive though only partially significantlong-run effects of training on employment or wages.     

The Impact of Computers on Productivity in the Trade Sector: Explorations with Dutch Microdata

The impact of computers on productivity in the Dutch trade sector during the period 1988-1994 is examined. The analysis is based on a panel data set derived from the Production Survey of Statistics Netherlands, which includes data on output, employment, wages, and various types of investment. A new method is developed to estimate IT- and non-IT capital stocks for each firm based on investment flows and booked depreciation figures by firm. A Cobb-Douglas production function setting is used to study the effect of computer capital stock on productivity. We find that computers contributed positively to productivity, even when firm-specific effects such as labour quality are accounted for. In retail trade computers yielded returns above their relatively high rental price. For wholesaling, no evidence for excessive returns is found. The rates of return were not subject to a decline in the period studied, in contrast to findings for the US. This suggests that the Netherlands has been lagging in the application of IT compared to the US and that further productivity boosting effects can be expected.     

PRODUCTIVITY AND FIRM DYNAMICS: CREATIVE DESTRUCTION IN INDONESIAN MANUFACTURING, 1994–2000

This paper examines the entry and exit, and the labour productivity, of Indonesian manufacturing firms with 20 workers or more, using a firm-level panel dataset constructed for the years 1994–2000. Overall change in manufacturing labour productivity reached 27.2%—an average growth of 3.5% per annum—between 1994 and 2000, a period that includes the 1997–98 Asian financial crisis, which hit Indonesia hard. Vibrant firm dynamics characterised this period, in which about 10% of manufacturing enterprises were renewed in any one year. By 2000, one-third of all enterprises in existence in 1994 had closed, but the number of enterprises that closed was lower than the number that entered and survived up to the year 2000. The replacement of exiting firms with newly entering firms contributed significantly to increases in overall labour productivity. Regulatory reform in support of this process should lead to gains in productive employment for Indonesian workers.     

Cross-country evidence on the allocation of COVID-19 government subsidies and consequences for productivity

We study the consequences of the Covid-19 pandemic and related policy support on productivity. We employ an extensive micro-distributed exercise to access otherwise unavailable individual data on firm performance and government subsidies. Our cross-country evidence for five EU countries shows that the pandemic led to a significant short-term decline in aggregate productivity and the direct support to firms had only a limited positive effect on productivity developments. A thorough comparative analysis of the distribution of employment and overall direct subsidies, considering separately also relative firm-level size of support and the probability of being supported, reveals ambiguous cross-country results related to the firm-level productivity and points to the decisive role of other firm characteristics.     

The minimum wage,exports, and firm performance: Evidence from Indonesia

This paper examines the interrelationship between changes in the provincial minimum wage, firms’ export behavior, and firms’ performance in Indonesia. In this regard, we apply a two-stage least squares regression analysis to detailed firm-level data of manufacturing enterprises during 2002–2014. We find that an increase in the minimum wage is associated with a decrease in a firm’s employment and productivity, but increase in its probability of exporting and markup. We also use the 2012 minimum wage reform in Indonesia to conduct a difference-in-difference analysis to further mitigate the potential endogeneity of minimum wage regulation. Our findings are generally robust to alternative estimation methods. Moreover, quantile regression results indicate that the average wage, firm size, and the education level of workers also affect the predictions. Above all, this study suggests that Indonesian exports and the country’s comparative advantage in international markets are not negligibly affected by higher labor costs caused by the growth in the minimum wage.     

Adjustment,employment characteristics and intra-industry trade

Adjustment, Employment Characteristics and Intra-Industry Trade. — In this paper we use data on individual workers to investigate a number of dimensions of adjustment and relate these to trade. Specifically, we estimate the relative incidence of changes in workers’ employment status with regard to sector, firm, occupation and region. We relate the incidence of adjustment to a range of labour market characteristics and indicators of trade exposure. Our findings are not consistent with the notion that there is a systematic relationship between the type of trade expansion (inter- or intra-industry) and the type of employment adjustment (within or between industry adjustment) or that there is less labour market adjustment associated with intra- than inter-industry trade.     

Which firms benefit the most from agglomeration? New evidence from an emerging country with consistent measure of productivity

Productivity influences of agglomeration for developed countries has been well documented so far, however, the studies are still rare for emerging and developing countries, especially ones focusing on firm heterogeneity. This article empirically investigates the effects of agglomeration on productivity using firm-level data from Vietnam – a typical emerging country. Firstly, the consistent productivity measure of each individual firm is yielded using the control function approach along with the instrumental variable procedure. Next, it is regressed on proxies of agglomeration, controlling firm and regional characteristics. Potential issues of self-selection and endogeneity are dealt with using the fixed effects technique and taking advantage of micro data. Findings show the productivity-enhancing influences of employment density and industrial diversity but no clear evidence on the productivity gains from specialization for a general firm. In addition, the most advantaged firms in highly agglomerated regions are proved to be foreign-owned, small-sized, or young. Finally, several sensitivity checks demonstrate that the estimated results are robust across various productivity measures, industrial levels, and samples.     

汇率变动对工资和就业结构影响的实证分析

本文由Frenkel两部门理论模型,采用IMF提供的人民币对美元实际汇率数据,通过实证分析发现,实际汇率升值会显著减少贸易部门就业,即人民币升值使贸易部门就业人数显著减少,非贸易部门第二产业工人就业人数会增加,对第三产业工人就业影响不大,但就业工人实际工资水平都会有所提高。所以本文的结论是,人民币升值能提升中低阶层福利水平,支持人民币升值。     

Efficiency Wages,Partial Wage Rigidity,and Money Nonneutrality

The efficiency wage theory is generally regarded as a plausible explanation as to why wages do not fall to clear labor markets in the presence of involuntary unemployment. At the current stage of its development, not much is said concerning the role of nominal money and the fluctuations in aggregate employment and output. Adopting the efficiency wage theory, this paper uses the idea of partial rigidity of wages in an attempt to explain why changes in money supply and other demand management policies can cause fluctuations in aggregate employment and output.     

Outward Foreign Direct Investment and Domestic Performance: the Italian Manufacturing and Services Sectors

How does outward foreign direct investment (FDI) affect employment and productivity growth in the home country? Does the impact of outward investment differ among manufacturing and service sectors? In this paper we analyze the effects of investing abroad using firm-level data for Italy for the period 2003–2006. We adopt matching techniques in combination with a difference-in-difference estimator in order to investigate the causal effect of becoming multinational on domestic employment and productivity. Preliminary results suggest that Italian outward FDI has limited effects on domestic employment and performance of internationalizing firms on average. However, results significantly differ depending on the sector (manufacturing versus services) where the MNEs are operating. In particular, we find that while in the manufacturing sector, outward FDI tends to strengthen both productivity and, to less extent, employment. In the service sector, we find a negative effect on employment (two years after the investment).     

Executive pay in Japan: the role of bank-appointed monitors and the Main Bank relationship

A feature of tournament models is that executive compensation is not independent of the wages paid at lower levels of the corporate hierarchy. Agency models show that compensation based on firm performance is a means by which incentives can be provided to executives once a promotion tournament has been resolved. In this paper, we combine elements of both models and show that the existence of an outsider who monitors the firm’s activities will lower the sensitivity of pay to firm performance for top executives and reduce the importance of tournament-based incentives. Using panel data for 55 Japanese electronics firms, we find support for the notion that bank-appointed Board members help monitor top executives and that tournament considerations are a particularly important feature of executive compensation in Japan.     

Do Multinational Enterprises Relocate Employment to Low-Wage Regions? Evidence from European Multinationals

This paper analyzes the employment behavior of home multinational enterprises (MNEs) in Europe. To this end we use a unique firm-level panel data set of more than 1,000 European multinational parent enterprises and their European affiliates. We find for parent firms operating in the manufacturing sector that the labor cost elasticity of parent employment with respect to North EU affiliates’ labor costs is positive and statistically significant. This implies employment substitution between parents and their North EU based affiliates takes place in response to wage cost differentials between the parent and its North EU based affiliates. In contrast, we find no evidence for such substitution effects between parent employment and its affiliates that are located in low-wage regions in the EU and in Central and Eastern Europe. JEL no. F23, J23