Capital Account Liberalization and Employment: Worldwide Firm-Level Evidence

44 Pages Posted: 24 May 2018

See all articles by Fangfang Hou

Fangfang Hou

Hong Kong Polytechnic University

Lisa Magnani

Macquarie University, Macquarie Business School

Xinpeng Xu

Faculty of Business, Hong Kong Polytechnic University

Date Written: May 23, 2018

Abstract

How does capital account liberalization impact on firm employment? Using a firm level panel data set that covers over 60 countries between 1982 and 2014, we find a statistically significant effect of capital account liberalization on firm employment. The magnitude of the impact is economically significant. The casual effect is identified through a generalized triple differences identification strategy. We also show that there are substantial heterogeneous effects across countries and firms. The effect is more pronounced for firms in industries that depend more on external finance while weaker for firms in countries with stronger employment protection legislation. Financially constrained firms and younger firms respond more positively to liberalization. Overall, our firm-level evidence from around the world adds support to the benefits of globalization.

Keywords: Employment; capital account liberalization; external finance dependence; financial constraints; employment protection legislation

Suggested Citation

Hou, Fangfang and Magnani, Lisa and Xu, Xinpeng, Capital Account Liberalization and Employment: Worldwide Firm-Level Evidence (May 23, 2018). Macquarie University Faculty of Business & Economics Research Paper. Available at SSRN: https://ssrn.com/abstract=3184069 or http://dx.doi.org/10.2139/ssrn.3184069

Fangfang Hou

Hong Kong Polytechnic University ( email )

11 Yuk Choi Rd
Hung Hom
Hong Kong

Lisa Magnani (Contact Author)

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

Xinpeng Xu

Faculty of Business, Hong Kong Polytechnic University ( email )

Hung Hom, Kowloon
Hong Kong

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