Trade reform and firm-level labor demand in Cameroon

Abstract

This paper investigates the impact of trade (tariffs and import penetration) and foreign direct investment (FDI) on labor adjustment and labor-demand elasticities in Cameroonian manufacturing sector. Unlike previous studies, I distinguish the effect on different skill groups of employees. Using firm-level data pooled across sectors, I find that trade openness leads to faster adjustment of different labor inputs with a higher speed for unskilled workers. Tariff liberalization does not have any statistically significant effects on labor-demand elasticities. I find strong evidence for the impact of imports on skilled-labor-demand elasticity when I replace tariffs with import-penetration ratios. I also find strong evidence that FDI inflows strongly increase unskilled-labor-demand elasticity. The sector-level results do not alter the previous findings.