Trade Liberalization, Firm Performance and Labor Market Outcomes in the Developing World What Can We Learn From Micro-Level Data?

We review the micro-level evidence on the effects of trade and investment liberalization in the developing world. The main findings can be summarized as follows. 1) There is evidence of trade-induced productivity gains; 2) These gains mainly stem from the intra-industry real-location of resources among firms with different productivity levels and: 3) they are larger in import competing sectors; 4) There is no evidence of significant scale efficiency gains. Indeed, unilateral trade liberalization is often associated with a reduced scale efficiency; 5) There is evidence of a pro-competitive effect of trade liberalization; 6) There is no evidence either of learning-by-exporting effects or of beneficial spillover effects from foreign owned to local firms; 7) There is evidence of skill upgrading induced either by technology imports, or by trade-induced reallocations of market shares in favor of plants with higher skill-intensity; 8) There is no evidence of trade-induced increases in labor demand elasticities; 9) There is no evidence of substantial employment contraction in import competing sectors.