Trade liberalization and employment: Verdoorn's law meets the Asian tigers

Many studies have dealt with the effects of industrialization and economic growth on productivity and employment. lit light of the recent success of several Asian economies in achieving rapid economic growth and industrialization, our study examines their experience in order to consider the role of trade liberalization in promoting productivity and employment. The results show that there is a consistent "productivity bias" (a less impressive effect on employment) for Asian economies during the 1980s and 1990s. Furthermore, the effect of higher trade on productivity may depend upon the existing composition of output and the degree to which sector shifts in output result in a displacement of labour. Trade liberalization, therefore, must be accompanied by appropriate policies for labour adjustment and income support.