Trade liberalisation and manufacturing employment in developing countries

• Published in: Structural change and economic dynamics Vol. 70; pp. 410 - 421
• Main Authors: Busse, Matthias, Dary, Stanley Kojo, Wüstenfeld, Jan
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01.09.2024
• Subjects: Developing countries; Manufacturing employment; Trade liberalisation; O24; Trade liberalisation; Manufacturing employment; F66; Developing countries; F14; F13
• ISSN: 0954-349X
• DOI: 10.1016/j.strueco.2024.05.003

•Manufacturing sector in developing countries has been subject to different shocks.•These shocks comprise technology improvement, trade liberalisation, and China.•Trade liberalisation has harmed manufacturing employment on average.•The impact has been strongest in sub-Saharan African and Latin American countries. The manufacturing sector has played an important role in the structural transformation process in the developing world by providing jobs and income opportunities. Using data from 131 developing countries from 1991 to 2020, we estimate the impact of trade liberalisation on manufacturing employment using panel fixed-effects and instrumental variable regression approaches. We find that trade liberalisation – on average – has harmed manufacturing employment in developing countries. There are considerable differences at the regional level; the impact has been most substantial in sub-Saharan African and Latin American countries. At least in these regions, trade liberalisation has contributed to deindustrialisation. Policies that improve labour productivity in manufacturing will increase the competitiveness of manufacturing firms in these countries in the face of growing trade globalisation.