Job creation, job destruction and international trade : an empirical analysis of French manufacturing firms between 1986 and 1992

Abstract

This paper provides an empirical analysis at the firm level of the link between international trade and employment, for French manufacturing firms across the period 1986-1992, for which homogenous data are available. Firms constantly involved in international trade throughout the period experience higher job destruction rates, or lower job creation rates, than those that are not. The same firms also contribute massively to the observed decrease in the share of production labour in overall employment, and to the decrease in the share of unskilled labour in production labour. However, the firms constantly involved in international trade through imports or exports turn out unsurprisingly to be the biggest firms. A simple analysis based on creation and destruction rates therefore fails to disentangle the size and international trade effects. An analysis of variance of the link between flows of international trade and firm employment, conditional on size as well as industry affiliation, shows that contrary to exports, imports are accompanied by a decrease in firm employment. In particular, imports of so-called « final goods », capturing the outsourcing abroad of part of the firms local production activities, are shown to have the strongest relationship with the decrease in total employment, as well as (unskilled) production employment. However, the empirical analysis of the link between exports and employment proves relatively unconclusive, for lack of data on horizontal foreign direct investment. Finally, controlling for firm technological innovation throughout the period does not alter the conclusions obtained on international trade.international trade, labour demand, skills