Event Detail

FDI Inflows and Domestic Firms: Adjustment to New Exporting Opportunities.”

Presented by:
Nina Pavcnik
Department of Economics
Dartmouth College

Friday, November 12, 2021
12:00 pm-1:15 pm
(different day)
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We investigate the long-run impacts of new export opportunities on foreign, private domestic, and state manufacturing firms in a low-income country, Vietnam. U.S. imports tariff reductions on Vietnam, due to the 2001 U.S.-Vietnam Bilateral Trade Agreement, caused an immediate surge in Vietnamese exports which flattens out in the medium run but continues to grow. The U.S. tariff reductions are associated with an increase in the number of firms, employment, and revenue in Vietnamese industries. While the number of foreign and domestic private firms responds immediately, state firms have a delayed response. Within industries, employment shares shift strongly to new entrants and away from continuing firms in response to tariff cuts. Foreign entrants expand their employment share considerably within high tariff cut industries, where employment in private entrants declines relatively. The large growth in employment share among foreign entrants is due to both initial employment at entry and to employment growth after entry.