Seker, Murat (2010): Rigidities in Employment Protection and Exporting.
Download (278kB) | Preview
There have been significant improvements in traditional trade policies in the past few decades. However, these improvements can only be fully effective when they are complemented with a favorable investment climate. This study focuses on a particular aspect of investment climate, namely labor regulations, and shows how these regulations can be discouraging from exporting. Using firm level data from 26 countries in Eastern Europe and Central Asia region, the paper empirically shows that firms that cannot create new jobs due to stringent labor regulations are less likely to export. Firms that plan to export expand their sizes before they start to export. However the rigidities in labor markets make this adjustment process costly. Higher costs of employment decrease operating profits and lead to a higher productivity threshold level required for entering export markets. As a result, a smaller fraction of firms can afford to export.
|Item Type:||MPRA Paper|
|Original Title:||Rigidities in Employment Protection and Exporting|
|Keywords:||Exporting, firm heterogeneity, labor regulations, developing countries, Eastern Europe and Central Asia region|
|Subjects:||F - International Economics > F1 - Trade > F16 - Trade and Labor Market Interactions
F - International Economics > F1 - Trade > F12 - Models of Trade with Imperfect Competition and Scale Economies ; Fragmentation
F - International Economics > F1 - Trade > F14 - Empirical Studies of Trade
J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J23 - Labor Demand
|Depositing User:||Murat Seker|
|Date Deposited:||20. Apr 2011 14:26|
|Last Modified:||19. Feb 2013 20:20|
Almeida, Rita and Pedro Carneiro (2009), “Enforcement of Labor Regulation and Firm Size,” Journal of Comparative Economics 37, pp. 28-46.
Alvarez, Roberto and Ricardo Lopez (2005), “Exporting and Performance: Evidence from Chilean Plants,” Canadian Journal of Economics, 38(4), pp. 1384-1400.
Bassani, Andrea and Ekkehard Ernst (2002), “Labor Market Institutions, Product Market Regulation, and Innovation: Cross-Country Evidence,” OECD Economics Department Working Paper No.316.
Bernard, Andrew B. and J. Bradford Jensen, (1999), “Exceptional Exporter Performance: Cause, Effect or Both?” Journal of International Economics, 47(1), pp. 1-25.
Bernard, A. B, J. B. Jensen, S. J. Redding, and P. K. Schott, (2007), “Firms in International Trade”, Journal of Economic Perspectives, 21(3), pp.105-30.
Besedes, Tibor and Thomas Prusa (2010), “The Role of Extensive and Intensive Margins and Export Growth,” forthcoming in Journal of Development Economics.
Besley, Timothy and Robin Burgess (2004), “Can labor regulation hinder economic performance? Evidence from India,” Quarterly Journal of Economics 119 (1), pp. 91–134.
Brenton, Paul, Christian Saborowski, and Erik Uexkull (2009), “What Explains the Low Survival Rate of Developing Country Export Flows?” World Bank Policy Research Working Paper No.4951.
Caballero, Ricardo, Kevin Cowan, Eduardo Engel, Alejandro Micco (2004), “Effective Labor Regulation and Microeconomic Flexibility,” NBER Working Paper No. 10744.
Cunat, Alejandro and Marc J. Melitz (2009), “Volatility, Labor Market Flexibility, and the Pattern of Comparative Advantage,” forthcoming in Journal of the European Economics Association.
Davis, Steven and John Haltiwanger (1992), “Gross Job Creation, Gross Job Destruction, and Employment Reallocation,” Quarterly Journal of Economics, 107(3), pp. 819-863.
Davis, Steven, John Haltiwanger, Scott Schuh (1998), Job Creation and Destruction, MIT press.
Dollar, David, Mary Hallward-Driemeier, and Taye Mengistae (2005), “Investment Climate and Firm Performance in Developing Economies,” Economic Development and Cultural Change,54(1), pp.1-31.
Dollar, David, Mary Hallward-Driemeier, and Taye Mengistae (2006), “Investment Climate and International Integration,” World Development, 34(9), pp. 1498-1516.
Greenaway, David and Richard Kneller (2007), “Firm Heterogeneity, Exporting and Foreign Direct Investment,” Economic Journal, 117(517), pp.134-161.
Hallward-Driemeier, Mary and Brooke Helppie (2007), “Why Don’t Firms Take Advantage of More Flexible Labor Options? Regulation, Enforcement and Corruption,” Working Paper, World Bank.
Haltiwanger, John, Stefano Scarpetta, and Helena Schweiger (2008), “Assessing Job Flows Across Countries: The Role of Industry, Firm Size, and Regulations,” NBER Working Papers No. 13920.
Helpman, Elhanan and Oleg Itskhoki (2010), “Labor Market Rigidities, Trade and Unemployment,” Review of Economic Studies,77(3):1100-1137.
Lopez, Ricardo A. (2005), “Trade and Growth: Reconciling the Macroeconomic and Microeconomic Evidence,” Journal of Economic Surveys, 19(4), pp. 623-648.
Khan, Tehmina (2006) , “Productivity Growth, Technological Convergence, R&D, Trade, and Labor Markets: Evidence from the French Manufacturing Sector,” IMF Working Papers 06/230.
Kuddo, Arvo (2009), “Labor Laws in Eastern European and Central Asian countries: Minimum Norms and Practices,” SP Discussion Paper, No 51698, World Bank.
Kugler, Adriana (2007), “The Effects of Employment Protection in Europe and the United States,” Els Opuscles del CREI, 18, pp.1-48.
Melitz, Marc (2003), “The Impact of Trade on Intra-Industry Reallocation and Aggregate Industry Productivity,” Econometrica, 71(6), pp.1695-1726.
Micco, Alejandro and Carmen Pages (2007), “The Economic Effects of Employment Protection: Evidence from International Industrial Data,” Inter-American Development Bank, Working Paper No.592.
Pierre, Gaelle and Stefano Scarpetta (2004), “Employment Regulations through the Eyes of Employers: Do They Matter and How Do Firms Respond to Them?,” IZA Discussion Papers No. 1424.
Scarpetta, Stefano, Thierry Tressel (2004), “Boosting Productivity via Innovation and Adoption of New Technologies: Any Role for Labor Market Institutions,” World Bank Discussion Papers WPS3273.