Foreign Exposure and Job Creation

Topic: Trade
Author: Murat Seker

In our highly globalized world, it is crucial for governments to monitor the flow of goods and services across their borders and to attract foreign investment. To be able to implement the most efficient trade policies, policy makers must understand the evolution of firms with foreign exposure. This note investigates differences in average job creation between purely domestic firms and firms with foreign exposure - that is, firms that export, import, or are foreign owned. The analysis shows that both exporters and importers perform better than non traders. This provides a strong rationale for further analyzing importers - a group that has been much less studied than exporters. The analysis further shows that firms with exposure to foreign markets through trade relations create, on average, three-quarters more jobs and are twice as productive as non trading firms.

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