Trade, Jobs, and Inequality

Abstract

This paper examines the impact of trade on employment, wages, and other outcomes across countries and explores the conditions and policies that help spread the gains from trade more evenly throughout the population. We exploit a large global firm-level dataset to examine the impact of import competition on employment, wages, and firm performance, as well as the firm, industry, and country factors that mitigate any negative impact of an import shock. In contrast to the results of some well-known single-country studies, we find limited adverse impact of import competition. In some countries and industries, import competition actually strengthens employment growth. In addition, import competition tends to improve average wages, investment, and firm profitability. Country characteristics, such as educational attainment, can also improve employment prospects in response to trade shocks. Finally, we find that firms experiencing greater import competition start with higher average wages; thus any relatively slower employment growth in this group of firms could lead to lower inequality.

Testing the Socio-Economic Stimulus of Pro-Employment Growth for Inclusion: The Case of Egypt

“…By the same vein, Hosono (2020) underlined the importance of FDI in developing productive jobs and economic opportunities in home countries and ensuring equal access to economic opportunities by expanding human capital, thereby achieving pro-employment growth. However, Beaton et al (2021) find a limited adverse impact of ((( international trade on growth and inequalities reduction through employment channel, where import competition has a marginal effect on strengthening employment, wages, and investment. Additionally, country characteristics such as educational attainment, can also improve pro-employment growth prospects in response to trade shocks.…”