Working Paper: NBER ID: w30729
Authors: Brian McCaig; Nina Pavcnik; Woan Foong Wong
Abstract: We investigate a low-income country’s long run employment response to new export opportunities. The U.S.–Vietnam Bilateral Trade Agreement reduced U.S. import tariffs on exports from Vietnam. Employment grew faster in the industries most exposed to the U.S. tariff reductions and this was driven by foreign affiliates of multinationals entering Vietnam. Foreign entrants continue to expand employment long after entry–even after 16 years. Most foreign entrants are exporters and from East Asia, highlighting that opportunities created by bilateral agreements are not just limited to signing parties. Vietnam’s subsequent capacity growth allows it to export to other markets over time.
Keywords: Foreign Direct Investment; Employment Growth; Trade Policy; Vietnam; Bilateral Trade Agreement
JEL Codes: F13; F14; O14; O19
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| tariff reductions (F13) | employment growth (O49) |
| foreign firm entry (F23) | employment growth (O49) |
| initial entry of foreign firms (F23) | subsequent employment growth (J68) |
| BTA (L62) | employment growth (O49) |
| tariff cuts (F13) | foreign firm entry (F23) |