Firm Entry and Exit, Labor Demand, and Trade Reform : Evidence from Chile and Colombia
There are increasing fears that trade reform - and globalization generally - will increase the uncertainty the average (especially less skilled) worker faces. If product markets become more competitive and the access to foreign inputs is increased,...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2001/08/1561499/firm-entry-exit-labor-demand-trade-reform-evidence-chile-colombia http://hdl.handle.net/10986/19571 |
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okr-10986-195712021-04-23T14:03:43Z Firm Entry and Exit, Labor Demand, and Trade Reform : Evidence from Chile and Colombia Fajnzylber, Pablo Maloney, William F. Ribeiro, Eduardo AGGREGATE WAGES AVERAGE TARIFFS BALANCE OF PAYMENTS BUSINESS CYCLE BUSINESS ENVIRONMENT CAPITAL GOODS COMPETITIVENESS COST FUNCTIONS CURRENCY DEMAND ELASTICITIES DEPRECIATION DUMPING ECONOMIC RISK ECONOMIC THEORY ELASTICITIES ELASTICITY EMPIRICAL EVIDENCE EMPLOYMENT ENDOGENOUS VARIABLES EQUILIBRIUM EXCHANGE RATE EXCHANGE RATE MOVEMENTS EXCHANGE RATES EXPORT SHARE EXPORTS FACTOR PRICE FIXED COSTS FOREIGN FIRMS FOREIGN INVESTMENT GLOBAL SHOCKS HUMAN CAPITAL IMPACT OF TRADE IMPACT OF TRADE LIBERALIZATION IMPERFECT COMPETITION IMPORT PENETRATION IMPORTS INDUSTRIAL RESTRUCTURING INDUSTRIAL SECTOR INFLATION INSURANCE INTERNATIONAL TRADE IRREVERSIBILITY LDCS MACROECONOMIC ADJUSTMENT MACROECONOMICS MARKET POWER MARKET RISK MARKET STRUCTURE OPENNESS PRICE CHANGES PRIVATIZATION PROCESS OF LIBERALIZATION PRODUCERS PRODUCT MARKETS PRODUCTIVITY PROFITABILITY PROTECTIONISM QUOTAS REAL EXCHANGE RATE REAL WAGES REDUCTION OF BARRIERS TARIFF RATE TARIFF REDUCTION TARIFF REDUCTIONS TECHNOLOGICAL PROGRESS TOTAL OUTPUT TRADE DEFICIT TRADE FLOWS TRADE LIBERALIZATION TRADE OPENNESS TRADE REFORM TRADE REGIME TRADE REGIMES TRADE RESTRICTIONS TRADE VARIABLES UNSKILLED LABOR WAGE CHANGES WAGE RATE There are increasing fears that trade reform - and globalization generally - will increase the uncertainty the average (especially less skilled) worker faces. If product markets become more competitive and the access to foreign inputs is increased, will demand for workers among existing firms become more elastic? Will labor markets become more volatile because bad shocks to output will translate into greater impacts on wages and employment? So far the literature on this question has focused almost entirely on labor demand within continuing firms. But much of the movement in the job market arises from the entry and exit of firms. The authors show that firms entering and exiting a market contribute almost as much to employment changes as firms continuing in a market. In several samples, firms entering and exiting affected the net change in-positions more than the expansion of continuing plants did, although contributions varied greatly across the business cycle and period of adjustment. Estimates of labor demand elasticities of entering and exiting firms were surprisingly similar in Chile and Colombia and somewhat higher than elasticities for firms that survived. Estimates of the effect of trade liberalization offer only ambiguous lessons on trade reform's probable impact on these elasticities. The data suggest that in Chile greater exchange rate protection does reduce the wage-employment elasticity of entering and exiting plants, but the results are reversed in Colombia's case. Moreover, in Colombia higher import penetration lowers the elasticity of labor demand and in Chile higher tariffs increase it. These findings, combined with very ambiguous results from probit regressions on the determinants of plant exit, suggest that circumspection is warranted in asserting that trade liberalization will increase the wage elasticity of labor demand. 2014-08-21T18:04:14Z 2014-08-21T18:04:14Z 2001-08 http://documents.worldbank.org/curated/en/2001/08/1561499/firm-entry-exit-labor-demand-trade-reform-evidence-chile-colombia http://hdl.handle.net/10986/19571 English en_US Policy Research Working Paper;No. 2659 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research Latin America & Caribbean |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
AGGREGATE WAGES AVERAGE TARIFFS BALANCE OF PAYMENTS BUSINESS CYCLE BUSINESS ENVIRONMENT CAPITAL GOODS COMPETITIVENESS COST FUNCTIONS CURRENCY DEMAND ELASTICITIES DEPRECIATION DUMPING ECONOMIC RISK ECONOMIC THEORY ELASTICITIES ELASTICITY EMPIRICAL EVIDENCE EMPLOYMENT ENDOGENOUS VARIABLES EQUILIBRIUM EXCHANGE RATE EXCHANGE RATE MOVEMENTS EXCHANGE RATES EXPORT SHARE EXPORTS FACTOR PRICE FIXED COSTS FOREIGN FIRMS FOREIGN INVESTMENT GLOBAL SHOCKS HUMAN CAPITAL IMPACT OF TRADE IMPACT OF TRADE LIBERALIZATION IMPERFECT COMPETITION IMPORT PENETRATION IMPORTS INDUSTRIAL RESTRUCTURING INDUSTRIAL SECTOR INFLATION INSURANCE INTERNATIONAL TRADE IRREVERSIBILITY LDCS MACROECONOMIC ADJUSTMENT MACROECONOMICS MARKET POWER MARKET RISK MARKET STRUCTURE OPENNESS PRICE CHANGES PRIVATIZATION PROCESS OF LIBERALIZATION PRODUCERS PRODUCT MARKETS PRODUCTIVITY PROFITABILITY PROTECTIONISM QUOTAS REAL EXCHANGE RATE REAL WAGES REDUCTION OF BARRIERS TARIFF RATE TARIFF REDUCTION TARIFF REDUCTIONS TECHNOLOGICAL PROGRESS TOTAL OUTPUT TRADE DEFICIT TRADE FLOWS TRADE LIBERALIZATION TRADE OPENNESS TRADE REFORM TRADE REGIME TRADE REGIMES TRADE RESTRICTIONS TRADE VARIABLES UNSKILLED LABOR WAGE CHANGES WAGE RATE |
| spellingShingle |
AGGREGATE WAGES AVERAGE TARIFFS BALANCE OF PAYMENTS BUSINESS CYCLE BUSINESS ENVIRONMENT CAPITAL GOODS COMPETITIVENESS COST FUNCTIONS CURRENCY DEMAND ELASTICITIES DEPRECIATION DUMPING ECONOMIC RISK ECONOMIC THEORY ELASTICITIES ELASTICITY EMPIRICAL EVIDENCE EMPLOYMENT ENDOGENOUS VARIABLES EQUILIBRIUM EXCHANGE RATE EXCHANGE RATE MOVEMENTS EXCHANGE RATES EXPORT SHARE EXPORTS FACTOR PRICE FIXED COSTS FOREIGN FIRMS FOREIGN INVESTMENT GLOBAL SHOCKS HUMAN CAPITAL IMPACT OF TRADE IMPACT OF TRADE LIBERALIZATION IMPERFECT COMPETITION IMPORT PENETRATION IMPORTS INDUSTRIAL RESTRUCTURING INDUSTRIAL SECTOR INFLATION INSURANCE INTERNATIONAL TRADE IRREVERSIBILITY LDCS MACROECONOMIC ADJUSTMENT MACROECONOMICS MARKET POWER MARKET RISK MARKET STRUCTURE OPENNESS PRICE CHANGES PRIVATIZATION PROCESS OF LIBERALIZATION PRODUCERS PRODUCT MARKETS PRODUCTIVITY PROFITABILITY PROTECTIONISM QUOTAS REAL EXCHANGE RATE REAL WAGES REDUCTION OF BARRIERS TARIFF RATE TARIFF REDUCTION TARIFF REDUCTIONS TECHNOLOGICAL PROGRESS TOTAL OUTPUT TRADE DEFICIT TRADE FLOWS TRADE LIBERALIZATION TRADE OPENNESS TRADE REFORM TRADE REGIME TRADE REGIMES TRADE RESTRICTIONS TRADE VARIABLES UNSKILLED LABOR WAGE CHANGES WAGE RATE Fajnzylber, Pablo Maloney, William F. Ribeiro, Eduardo Firm Entry and Exit, Labor Demand, and Trade Reform : Evidence from Chile and Colombia |
| geographic_facet |
Latin America & Caribbean |
| relation |
Policy Research Working Paper;No. 2659 |
| description |
There are increasing fears that trade
reform - and globalization generally - will increase the
uncertainty the average (especially less skilled) worker
faces. If product markets become more competitive and the
access to foreign inputs is increased, will demand for
workers among existing firms become more elastic? Will labor
markets become more volatile because bad shocks to output
will translate into greater impacts on wages and employment?
So far the literature on this question has focused almost
entirely on labor demand within continuing firms. But much
of the movement in the job market arises from the entry and
exit of firms. The authors show that firms entering and
exiting a market contribute almost as much to employment
changes as firms continuing in a market. In several samples,
firms entering and exiting affected the net change
in-positions more than the expansion of continuing plants
did, although contributions varied greatly across the
business cycle and period of adjustment. Estimates of labor
demand elasticities of entering and exiting firms were
surprisingly similar in Chile and Colombia and somewhat
higher than elasticities for firms that survived. Estimates
of the effect of trade liberalization offer only ambiguous
lessons on trade reform's probable impact on these
elasticities. The data suggest that in Chile greater
exchange rate protection does reduce the wage-employment
elasticity of entering and exiting plants, but the results
are reversed in Colombia's case. Moreover, in Colombia
higher import penetration lowers the elasticity of labor
demand and in Chile higher tariffs increase it. These
findings, combined with very ambiguous results from probit
regressions on the determinants of plant exit, suggest that
circumspection is warranted in asserting that trade
liberalization will increase the wage elasticity of labor demand. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Fajnzylber, Pablo Maloney, William F. Ribeiro, Eduardo |
| author_facet |
Fajnzylber, Pablo Maloney, William F. Ribeiro, Eduardo |
| author_sort |
Fajnzylber, Pablo |
| title |
Firm Entry and Exit, Labor Demand, and Trade Reform : Evidence from Chile and Colombia |
| title_short |
Firm Entry and Exit, Labor Demand, and Trade Reform : Evidence from Chile and Colombia |
| title_full |
Firm Entry and Exit, Labor Demand, and Trade Reform : Evidence from Chile and Colombia |
| title_fullStr |
Firm Entry and Exit, Labor Demand, and Trade Reform : Evidence from Chile and Colombia |
| title_full_unstemmed |
Firm Entry and Exit, Labor Demand, and Trade Reform : Evidence from Chile and Colombia |
| title_sort |
firm entry and exit, labor demand, and trade reform : evidence from chile and colombia |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2001/08/1561499/firm-entry-exit-labor-demand-trade-reform-evidence-chile-colombia http://hdl.handle.net/10986/19571 |
| _version_ |
1764440041807937536 |