Impact of international competition on Swedish manufacturing : individual and firm-level evidence from the 1990s

Sammanfattning: This thesis consists of four papers examining the impact of international competition on Swedish manufacturing and labor market during the 1990s. By using detailed individual and firm-level information I aim to investigate how increased exposure to international trade, in terms of both export orientation and import penetration, affects technology development, profitability and wage structure.Paper [1] (co-authored with Pär Hansson) is a study on links between exporting behavior and productivity. We find support for the self-selection effect of firms, i.e. more productive firms are more likely to enter into the export market. In addition, we obtain evidence indicating that export enhances firm-level productivity.By recognizing the intra-industry heterogeneity in terms of exporting behavior and difference in productivity level among firms, we quantify both within-firm and reallocation effects that contribute to overall manufacturing productivity growth. The decomposition shows that the within-firm effect dominates, but intra-industry reallocation towards more productive firms has also taken place. A further breakdown of these two effects into domestic and export components shows that productivity growth appears to be more rapid for large exporting firms.Paper [2] analyzes the impact of import penetration on firm-level market power, measured by (average) price-cost margin. The total imports are divided into five country groups to investigate the differential strengths of the pro-competitive effects depending on the countries of origin. The EU-members and the EU-candidate countries (the recent EU members) are of special interest in the context of increased economic integration.The results indicate that imports from the EU-candidate countries have substantial disciplinary effects on firm-level market power, while imports from the EU-member countries only appear to have an impact in firms with large market shares in highly concentrated industries.Paper [3] examines how import competition from different origins and the presence of product differentiation affect market power of Swedish manufacturing firms during the 1990s. Applying Roeger’s method (1995), I perform the empirical analysis based on detailed firm-level data and estimate an average mark-up level of Swedish manufacturing firms.The general finding is that imports from both European countries and other high-income countries outside Europe impose disciplinary effects on price-cost margins of Swedish manufacturing firms. The strongest effect is from EU candidate countries (the recent EU members). However, the competitive pressure associated with import is relaxed in the presence of product differentiation.Paper [4] (co-authored with Lihong Yun) examines the inter-industry wage structure in Swedish manufacturing sectors using matched employer-employee data for the period 1996 to 2000. First, we use detailed individual and job characteristics to estimate industry-specific and time-varying wage premiums. Second, we examine the impact of international trade on the wage premiums, after controlling for effects of domestic competition and technical progress.Our results indicate that industries that face intensive import competition from low-income countries have lower wage premiums. Surprisingly, the wage premiums are not related to export intensities. Furthermore, technical progress, measured by investment in R&D activity, appears to enhance inter-industry wage premiums.