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Firm heterogeneity and trade-induced layoffs: An empirical investigation

Pinar Uysal (), Yoto Yotov and Thomas Zylkin ()

European Economic Review, 2015, vol. 75, issue C, 80-97

Abstract: We use a novel data set with verified observations of trade-induced layoffs by U.S. firms to study the interaction between firm productivity and trade liberalization as key determinants of firm-level job destruction due to trade. We find that patterns of trade-induced layoffs are broadly consistent with the predictions for firm-level employment generated by the Melitz (2003) heterogeneous firms theory – the number of trade-induced layoffs increases with firm productivity for non-exporting firms but decreases with firm productivity for exporting firms. The fact that exporting firms incur trade-induced layoffs at all invites a refined interpretation of the theory. Our findings suggest that exporting firms may lay off some workers who work in production for their shrinking domestic segments, while also engaging in some within-firm reallocation of workers. We also find that, even after controlling for productivity and export status, larger firms lay off more workers due to trade competition.

Keywords: Heterogeneous firms; Trade liberalization; Trade-induced layoffs (search for similar items in EconPapers)
JEL-codes: F10 F12 F14 F16 J63 (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1016/j.euroecorev.2015.01.006

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