The Effects of export on wages and employment

Abstract

This study examines whether a company’s export activity increases employment and enhances wages by analyzing plant-level panel data of Korea’s manufacturing industry. Previous research has heavily focused on productivity, which was deemed as a factor that boosted companies’ performance, but researchers have not reached a solid agreement on whether export promotes productivity. In this paper, the empirical evidence supports that the firms who had started exporting for three years offered higher wages and saw an increased need for hiring new employees than the matched non-exporters did. Moreover, the export-starting effect on wages and employment is evident in 8 out of 22 manufacturing sectors: (1) food products and beverages, (2) rubber and plastics products, (3) other non-metallic mineral products, (4) basic metals, (5) other machinery and equipment, (6) other electrical machinery and electric transformers, (7) electronic components, visual, sounding, and communication equipment, and (8) motor vehicles and trailers. In terms of wages per worker, manufacture of medical, precision, and optical instruments reports the highest amount with a significant mean difference of 11.7%p between the export starters and the non-exporters. The electronic component, visual sounding, and communication equipment manufacture reveal that export starters hired 68 workers more than the non-exporters, which shows the highest mean difference. These research findings suggest that export promotion policies should be designed to support firms in readiness for accessing the export market. Additionally, such policy could be implemented in a structured manner for each manufacturing sector since the magnitude of the impacts varied.