Association for Public Policy Analysis & Management

The increasing flow of goods, services, capital, and labor across national borders complicates the debate on how modern societies can and should address the widening gap between rich and poor. It is also important to understand how firms, which are the engines of growth and job creation, behave in response to globalization and affect the domestic labor market.

Since Melitz (2003), the international trade literature have used the heterogeneous firm model to explain firm behavior and characteristics, and have extended its application to analyzing labor market outcomes such as wage and unemployment by building upon the concepts of imperfect labor market and technological advancement. However, most of the empirical studies are based on firm- and plant-level datasets from developed countries or a handful of developing countries.

In this paper, I will examine what types of workers are employed by firms, how firms train their employees, and what types of workers they continue to look for. In particular, I will focus on youth and women employment in developing countries. Also, I will examine whether firms that export behave differently from firms that only operate in the domestic market. Specifically, I would like to answer the following questions: (1) Do exporting companies employ better educated and experienced workers, and do exporting and non-exporting companies firms differ in providing training and education programs for their workers? (2) Are workers who are involved in exporting industries more likely to receive higher wages than workers in non-exporting industries? (3) Do empirical results from developing countries support theoretical predictions based on the international trade literature? Is this observed in all countries examined or do some countries show different patterns?

To address the research questions above, this study uses a quasi-experimental design approach that involves econometric analysis methods to analyze individual- and firm-level datasets. Wage, wage inequality, and employment will be used as dependent variables, while key independent variables include firms’ export and ownership status. I will use the Labor Demand Enterprise Survey (LDES) micro data files for 2012-2013, collected by the International Labour Organization (ILO) in seven African and Asian developing countries: Benin, Liberia, Malawi, Nepal, Tanzania, Viet Nam, and Zambia.

This paper will contribute to the literature by providing empirical evidence on developing countries’ firm activities related to the labor market; specifically, how firms recruit, employ, and train their female and youth workforce.