Employment dynamics and openness to trade in Finnish manufacturing

Abstract

This paper examines internationalisation and employment dynamics in the Finnish manufacturing sector 1980–2001 using plant and industry-level data. According to the results, there is a large heterogeneity in the patterns of international trade and employment across industries and over time. In addition, the effect of macroeconomic fluctuations on employment dynamics is considerable. The results suggest that higher international openness stimulates labour demand during periods of recovery. Higher import competition in the industry has negative employment consequences, whereas higher export intensity increases net employment growth. However, plant efficiency is an important factor in adjusting to the effects of import competition. Unexpectedly, there is also some evidence that trade liberalisation reduces job turnover especially in import-intensive sectors.