Job Destruction and Productivity Gains in Heterogeneous Incumbent Firms: Comparing the Effects of Imports and Inward Foreign Direct Investment

Using a ten-year panel of firm-level data for the Slovenian manufacturing sector, we find that as a result of investment liberalization, the least-efficient incumbent firms are experiencing job destruction, and the most-efficient are experiencing productivity gains; firms from the middle part of the...

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Bibliographic Details
Published in:Emerging markets finance & trade 2014-11, Vol.50 (6), p.154-173
Main Authors: Kejžar, Katja Zajc, Ponikvar, Nina
Format: Article
Language:English
Subjects:
Employment
employment growth
firm heterogeneity
Foreign investment
Imports
inward FDI
Productivity
Regular Articles
Studies
TFP distribution
TFP growth
Trade liberalization
Trade policy
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Summary:Using a ten-year panel of firm-level data for the Slovenian manufacturing sector, we find that as a result of investment liberalization, the least-efficient incumbent firms are experiencing job destruction, and the most-efficient are experiencing productivity gains; firms from the middle part of the total factor productivity (TFP) distribution are faced with both effects. Further, local firms from the lower and middle parts of the TFP distribution also experience a competition effect from imports in terms of both reduced employment and TFP growth. Our results imply that policy measures affecting foreign firm entry would have a relatively uniform effect on the employment growth of local firms, while their TFP growth would adjust significantly differently across the TFP distribution.
ISSN:1540-496X
1558-0938
DOI:10.1080/1540496X.2014.1013869