Import penetration and manufacturing employment: Evidence from Africa
Solomon Owusu, Gideon Ndubuisi & Emmanuel Buadi Mensah
#2022-007
Exposure to import competition can either help or hurt domestic
employment creation. There is, however, a dearth of cross-country
empirical evidence assessing labor market effects of import penetration
in Africa. This paper fills this gap. Using manufacturing industry and
establishment-level data across 20 African countries and estimating a
conditional and unconditional labor demand model, we find an unambiguous
employment creation effect of intermediate good import penetration,
whilst final good import penetration has a negative, or at best, an
insignificant effect on employment. Splitting intermediate good import
penetration into their origins, we find that intermediate good import
penetration from developed (developing) countries is employment
increasing (reducing). Further analyses reveal that the positive
employment effects of intermediate import penetration from developed
countries disproportionately benefit the skilled workforce. We also find
that industries with higher absorptive capacity stand to gain more from
intermediate good import penetration from developed countries, with the
negative effects of intermediate good import penetration from developing
countries also diminished for these industries. We discuss the
implications of our findings.
Keywords: Import Penetration, Employment, Absorptive Capacity,
Manufacturing, Africa
JEL: F11, F14, L25, L60