The Impact of FTAs on Firm Productivity and Employment: Evidence from Korea

The Impact of FTAs on Firm Productivity and Employment: Evidence from Korea

This paper empirically examines the impact of free trade agreements (FTAs) in Korea on firm productivity and employment at home. Based on the previous analysis showing that trade liberalization can affect firm-level performance through several channels, we focus on the expansion of export as the major channel. Using the firm-level export data with 5,981 firms over the period 2001-2009, we find that 1) overall, there is the positive relationship between exports and total factor productivity (TFP) and the number of employments, and 2) FTAs in Korea have positive impact on them at home through the expansion of exports. In addition, these positive effects are more prominent after the entry into force, implying that there are time-varying effects of FTAs on TFP and employments.