The impact of exporting on firm employment: An example on Turkish manufacturing industry

In this study, we investigate impact of exporting on firm employment for Turkish Manufacturing Industry over the period 2003-2015. For this purpose, to avoid the sample selection and possible endogeneity problem, treatment models are constructed and "Propensity Score Matching (PSM) techniques accompanied by the "Difference-in-Differences" (DID) methodology are utilized to estimate these models. In this way, the self-selection of firms into export markets is controlled and the effect of exports on firms' employment could be accurately estimated within the framework of the "post-entry effects hypothesis" proposed by the New new international trade theories. First of all, the effects of exporting behaviour on firm employment was evaluated as a whole for the manufacturing industry. Next, firms are categorized in terms of their technological knowledge intensity, wage level and export sophistication level of the export goods. The results of the study show that the post-entry effects hypothesis is at work for Turkish Manufacturing Industry firms where exporting behaviour significantly increases employment. The positive effect of the exporting on employment not only arises in the period when firms starts to export, but also in the following periods, and it is even higher for two-way traders in all periods. Positive effects of exports on employment are more pronounced for the firms operating in low technology and labour-intensive sectors with lower wages where relatively unskilled labour are employed. This finding indicates that over the analysis period in question, the growth of exports of manufacturing industry mainly increases the demand for unskilled labour.