Abstract
This study considers for the first time the role of rising import competition on employment in Vietnam. Using a time differenced and instrumental variables approach, our study shows that import competition results in employment contraction. Firms operating in industries that face greater import competition have reduced employment. We also find strong evidence of a negative impact of import competition for small and very small firms, as well as in the period before Vietnam’s World Trade Organization (WTO) accession. Our results also reveal that previous studies at the industry-level can provide biased estimates because of not controlling for the heterogeneity of firm characteristics.
Highlights
International trade in the early twenty-first century has been characterised by the boom in Chinese exports
This article examined how firm employment is affected by increasing import penetration in the Vietnam manufacturing sector
Based on an unbalanced panel data set spanning 2000–2009, we identify the effect of import penetration on employment growth by examining within-industry and within-firm variation
Summary
International trade in the early twenty-first century has been characterised by the boom in Chinese exports. Studies at the country- or industry-level may not detect the real impacts of imports on employment. The present study is expected to have a number of unique contributions to the literature It draws upon a unique panel data set to provide the first evidence at the firm-level of the impact of import competition on employment in Vietnam. A challenge in empirical studies of the impact of imports on employment relates to biased estimates possibly due to unobserved characteristics and potentially endogenous imports. These are overcome by using a combination of time-differenced and instrumental variable estimations.
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