GEP Research Paper 98/03

An Empirical Assessment of the Impact of Trade on Employment in the United Kingdom

David Greenaway, Robert C. Hine and Peter Wright

Published in European Journal of Political Economy , Vol. 15 (1999) pp. 485-500.

Abstract

This paper investigates the impact of trade on industry level employment outcomes for a sample of 167 manufacturing industries in the United Kingdom. We build on a dynamic labour demand equation and incorporate imports and exports in a panel framework from 1979-1991. We find that increases in trade volumes, both in terms of imports and exports, cause reductions in the level of derived labour demand. This is consistent with the view that increased openness serves to increase the efficiency with which labour is utilised within the firm. Our results however find limited evidence that the potential for substituting foreign for domestic workers increases the wage elasticity of the derived labour demand function. Also, contrary to the populist view, the disciplining effects of trade with East Asia and Japan appears to be less marked than that associated with imports from the EU.

Issued in December 1998.

This paper is available in PDF format .