FDI Inflows and Domestic Firms: Adjustments to New Export Opportunities

Brian McCaig, Nina Pavcnik and Woan Foong Wong

No 30729, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We investigate a low-income country’s long run employment response to new export opportunities. The U.S.–Vietnam Bilateral Trade Agreement reduced U.S. import tariffs on exports from Vietnam. Employment grew faster in the industries most exposed to the U.S. tariff reductions and this was driven by foreign affiliates of multinationals entering Vietnam. Foreign entrants continue to expand employment long after entry–even after 16 years. Most foreign entrants are exporters and from East Asia, highlighting that opportunities created by bilateral agreements are not just limited to signing parties. Vietnam’s subsequent capacity growth allows it to export to other markets over time.

JEL-codes: F13 F14 O14 O19 (search for similar items in EconPapers)
Date: 2022-12
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