Labor market institutions, firm-specific skills, and trade patterns

Heiwai Tang

Journal of International Economics, 2012, vol. 87, issue 2, 337-351

Abstract: This paper studies how a country's labor market institutions, by affecting workers' skill acquisition, can shape its export patterns. I develop an open-economy model in which workers undertake non-contractible activities to acquire firm-specific skills on the job. In the model, labor market protection raises workers' incentives to acquire firm-specific skills relative to general skills, turning labor laws into a source of comparative advantage. In particular, the model shows that countries with more protective labor laws export relatively more in firm-specific skill-intensive sectors at both the intensive and extensive margins. To test the theoretical predictions, I construct sector proxies for the firm-specific and industry-specific skill intensity by estimating returns to firm tenure and industry tenure for different U.S. manufacturing sectors during the 1974–1993 period. By estimating sector-level gravity equations for 84 countries using the Helpman–Melitz–Rubinstein (2008) framework, I find evidence supporting the predicted effects of labor market institutions at both margins of exports.

Keywords: Labor market institutions; Margins of trade; Trade patterns; Firm-specific skills (search for similar items in EconPapers)
JEL-codes: F10 F12 F14 F16 J24 L22 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (44)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0022199612000025
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Labor Market Institutions, Firm-specific Skills, and Trade Patterns (2010)
Working Paper: Labor Market Institutions, Firm-specific Skills, and Trade Patterns (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:87:y:2012:i:2:p:337-351

DOI: 10.1016/j.jinteco.2012.01.001

Access Statistics for this article

Journal of International Economics is currently edited by Martin Uribe and Costas Arkolakis

More articles in Journal of International Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().