The Impact of Trade Liberalization on Employment, Capital and Productivity Dynamics: Evidence from the Uruguayan Manufacturing Sector (2004)

Abstract

This paper studies the impact of trade liberalization on labor and capital gross flows and productivity in the Uruguayan manufacturing sector. Uruguay opened its economy in the presence of—at least initially-strong unions and structurally different industry concentration levels. Higher international exposure implied slightly higher job creation and an important increase in job and capital destruction. Unions were able to dampen this effect. Although not associated with higher creation rates, unions were effective in reducing job and capital destruction. Industry concentration also was found to mitigate the destruction of jobs but had no effect on job creation or capital dynamics.

Keywords: trade liberalization, employment and capital reallocation, TFP, Latin-America, Uruguay