TRADE

Increased openness of economies has been put forward as one explanation for less job stability. For manufacturing in Canada (1970-1979), Baldwin and Gorecki (1983) examined entry and exit of firms from industries. This study looked at trade in combination with other variables relating to industrial structure. Distinguishing between domestic and foreign firms, they found that the former were significantly influenced by trade performance while the latter were much less so.
Entry was positively correlated with growth in the volume of exports and negatively correlated with growth in the volume of imports. However entry by plant creation responded less to growth in exports than to growth in domestic sales lending support to the argument that export opportunities require larger firms.

Exit was lower the higher the growth in exports and was positively correlated with growth in imports. The effect of balanced changes in trade may have been to decrease the number of domestic firms via the effect of export and import growth on entry and exit10. Leonard and Schettkat (1991) suggest that greater product market stability, including greater export market stability, may account for lower turnover in Germany than in the U.S. For Germany, Muller and Owen (1985) found that growth in exports was related to growth in plant size in twelve manufacturing industries. For Norway (manufacturing), Morch von der Fehr (1991) found a statistically significant negative correlation of export market orientation with the firm entry rate while the import share or the domestic market was also negatively correlated though the relationship was not statistically significant.

Both variables had been expected to affect entry negatively on the assumption that they were associated with increased risk. Baldwin, Dunne and Haltiwanger (1993) included the effect of trade on job creation and job loss for the manufacturing sector in Canada and the United States. Exports were positively associated with job creation in Canada and the United States though this result primarily reflected variation across industries rather than changes over time.
In both countries increases in exports over time led to lower job creation though the effect was only significant in the United States. In the United States, but not in Canada, exports were also associated with increased job losses. Imports were correlated with higher job creation and higher job losses in both countries. This was true in both the short and the long-run. Increasing imports over time have been associated with increased job losses in Canada but not in the United States. Davis, Haltiwanger and Schuh (1994) found that there were not distinct patterns in job creation and loss when industries were grouped according to import penteration and export share, except that in industries with high import penetration ratios, job loss was elevated.