International Trade and Employment

A Quantile Regression Approach

Existing studies on the relationship international trade and manufacturing employment often use a mean regression approach and focus mainly on developed countries. Few studies have applied a quantile regression approach to examine this relationship in developing countries. To fill the gap, this study considers, for the first time, the impact of rising international trade on employment in a developing country, Vietnam. Using an unbalanced panel dataset for the 2010~2015 period, we find a positive linkage between international trade and firm employment when ordinary least square is used. However, by using a fixed-effect quantile approach, we find that international trade is negatively linked with employment for firms in the low employment percentile but positively related with firms in the high employment percentile. Our results also show that previous studies at the national or industry level may have produced biased results by not controlling for the heterogeneity of firm characteristics.