The Employment Generating Effects of Exporting: Firm level evidence of Micro, Small and Medium Enterprises (MSMEs) in Ghana

r4d Working Paper 2017/02 by Emmnuel Nii Abbey, Agyapomaa Gyeke-Dako, Abena D. Oduro, Ebo Turkson and Priscilla Twumasi Baffour

ABSTRACT: It is a stylized fact that export promotion is a good policy, as exporting firms have been shown to have the potential to employ more workers. This is so because of the hypothesized redistribution of labour from the import-substituting sectors and towards the exporting sectors or the generation of new employment opportunities for unemployed labour, as a country begins to export. While this phenomenon is typical for many advanced economies, some developing countries have not realised this important economic advantage. For some of these developing countries, and as they began to export, the import substituting sectors displaced labour, while the exporting sectors could not absorb the displaced labour nor generate new employment opportunities. Theoretically, this is possible when international trade is analysed within the context of heterogeneous firms and bargaining, trade in tasks (offshoring), labour market frictions and incomplete contracts. Using a firm level survey of micro, small and medium Enterprises (MSMEs) in Ghana between 2013 and 2015, this paper attempts to answer the question of what the employment generating effects of exporting are for manufacturing MSMEs in Ghana and what could likely be an explanation.