Trade Costs and Job Flows: Evidence from Establishment-Level Data

Abstract

Changes in the costs of trading inputs or final goods affect establishment-level job flows. Using a longitudinal database containing the universe of manufacturing establishments in California from 1992 to 2004, we find that a decline in input or final-good trade costs is associated with job destruction in the least productive establishments, job creation in the most productive establishments, and an increase in the death likelihood of the least productive establishments. The evidence is consistent with predictions of models of trade with heterogeneous firms. Additionally, the evidence shows that the effects of input trade costs on establishment-level job flows are larger than the effects of final-good trade costs.

Outward FDI and Domestic Input Distortions: Evidence from Chinese Firms

“…Proof: Comparing equation (18) with equation (20) and noticing that overall sales are proportional to operating profit, we know that the ratio of foreign sales to domestic sales is higher for private MNCs (than for state-owned MNCs) conditioning on ϕ. This proves the first part of this proposition.…”

“…In Table E.2 in Appendix E, we scale down the TFP of firms in each industry by normalizing the TFP of the most productive firm in that industry to one (see Arkolakis 2010; Groizard et al 2015). After normalization, we calculate the relative TFP of firms in each industry.…”

“…These results receive strong empirical support from Table 3, since the average firm size (i.e., log sales and log employment) of private exporting firms and MNCs is much smaller than that of state-owned exporting firms and MNCs. 18 This size difference is especially true when we focus on the domestic sales of MNCs. Furthermore, the size premium for state-owned MNCs holds in the relative sense as well, which is summarized by the following proposition.…”

“…The first case is the case in which both firms are non-exporters before the reduction in w H f I . Equations ( 5), (18) and (20) together imply that π PO (ϕ)…”

International trade and employment: Theory and evidence from Korean firms

“…In many ways, the paper closest to ours is the one by Groizard et al (2015). Using establishment‐level data from Californian manufacturing industries from 1992 to 2004, they find that, consistent with the prediction of trade models with heterogeneous firms, a decline in trade costs (input and output) is associated with job destruction (creation) in the least (most) productive establishments, with firm death most likely in the case of the least productive establishments.…”