MOQAT

Trade liberalization was at the core of structural reforms in the last decades. A lot of attention has been paid recently to the microeconomic effects of trade openness on firms’ competitiveness and labor markets. On the production side, recent works (Verhoogen, 2008, Khandelwal, 2010) highlight alternative strategies to price competitiveness to improve firm efficiency in a globalized world: firms can increase their market shares abroad by upgrading the quality of their products (non-price competitiveness). Our recent work shows that trade liberalization creates incentives for firms to upgrade the quality of foreign inputs to improve the quality of exported final goods (Bas and Strauss-Kahn, 2015). On the labor market, the literature has shown that trade shocks induce large labor market adjustments that have important distributional consequences (Autor et al. 2013). This research program proposes several projects to understand the mechanisms at play. Conducting micro econometric analysis theoretically grounded using detailed firm-product data for several countries, this research program explores the heterogeneous effects of international trade on firm performance, quality upgrading and employment demand. The first two projects focus on the role of product quality on final prices and demand, on the one hand, and on the impact of input quality upgrading on product innovation and employment of different skills, on the other hand. The two other projects look at the relationship between firms’ exposure to international markets and different domestic labor market outcomes such as volatility of workers of different skills and gender differences in occupational status. The last project investigates the impact of resource misallocation on external competitiveness and asks whether firms optimizing their use of labor compete more successfully in international markets. The main contribution of this research program to the literature is to look at the different ways in which firms can enhance their non-price competitiveness in a globalized world and its effects on labor demand. The research projects proposed are innovative in several ways. First, all projects share one common ambition: they aim at identifying the causal relationship between international trade, firm performance and labor market outcomes relying on very detailed micro-data (at the firm-product and country level) and original econometric identification strategies based on variations of exogenous trade shocks. Second, the empirical analysis is always theoretically guided. All projects proposed a theoretical framework that rationalizes the mechanisms at play and the theoretical implications that will be tested. Third, the research topics of each project are novel and original and aim at contributing to the literature in several ways: (i) there is no evidence on the heterogeneous impact of tariff cuts on export prices depending on product quality at the micro level, (ii) there is no work that has explored the relationship between firms’ foreign input-quality upgrading and skilled bias technical change, (iii) there is a lack of evidence on the impact of firms’ export exposure on the employment volatility across workers of different skill, (iv) little is known about the impact of trade liberalization on informal employment depending on gender and occupations and (v) there is little micro-level evidence on the relationship between firm heterogeneity, external competitiveness and misallocation of resources within the firm. This research agenda does not lack of policy implications. By exploring the heterogeneous effects of trade openness on firms’ decisions to innovate, upgrade their quality and on changes in employment demand and in occupational status of different types of workers, this research program aims to identifying the firms and workers that win and lose from globalization. Leaving room for industrial, labor market and social policies to complement trade policies.