Impact of international trade on employment: Evidence from Australian manufacturing industries

Manufacturing employment in Australia has been on a long-run declining trend over the past four decades. It is a widely held view that import competition, especially from low wage countries, is an important factor driving this trend. Low-wage countries have indeed significantly increased their collective share of Australia’s imports of manufactured goods. The results also indicate that manufactured imports have a statistically significant negative relationship with manufacturing employment. Exports, on the other hand, have the opposite effect. Trade's role in employment determination, however, has waned over time. A key, albeit tentative, result of the empirical analysis is that trade and wage elasticities of labour demand are likely related in a way that trade imposes a discipline on labour markets.