WIFO Working Papers

Discussion papers by WIFO staff, consultants and guests – As of 2006 available online only – Free download

WIFO Working Papers are not peer reviewed and are not necessarily based on a coordinated position of WIFO. The authors were informed about the Guidelines for Good Scientific Practice of the Austrian Agency for Research Integrity (ÖAWI), in particular with regard to the documentation of all elements necessary for the replicability of the results.

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Trade Costs in Services. Firm Survival, Firm Growth and Implied Changes in Employment
WIFO Working Papers, 2019, (593), 48 pages
Online since: 18.12.2019 0:00
This paper provides new insight into the firm-level employment impacts of trade cost changes at the industry level in the Austrian services sector. We apply a two-part model of firm survival (exit) and firm growth. Separate regressions for firm entry rates at the industry-region level complete the picture of total trade-induced net job creation. We implement the trade cost measure introduced by Chen and Novy (2011) and base it on own estimates of industry specific substitution elasticities. Falling trade costs in the Austrian services sector over the period 2000 to 2014 resulted in net job creation of about 19,000 jobs accounting for 9.5 percent of overall job flows in the sector. The smallest and least productive firms contract while large and productive firms expand as predicted by theory. Most adjustments occur at the extensive margin due to changes in the probability of firm survival.
JEL-Codes:C15, C21, C25, C23, C26, F14, F16, F66, J21, D21, L20, L80
Keywords:Services trade, Trade costs, Elasticity of substitution, Firm-level evidence, Heterogenous firms, Gravity model, Job flows, Trade and employment
Research group:Industrial, Innovation and International Economics
Language:English