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Does increased import competition lead to higher returns to skill within an industry and, therefore, to greater incentives for skill acquisition? Does it also induce skill upgrading by the industry's existing workforce? To answer these questions, this paper follows individual workers across skills/occupations, firms, and industries using a longitudinal matched employer-employee data set covering all workers and firms in Portugal over 1986-2000. To identify the effects of international competition the analysis uses two exogenous measures of changes in international competition at the industry level. The first is a quasi-natural experiment based on the strong appreciation of the Portuguese currency during 1989-1992 and preexisting differences in trade exposure across industries in a differences-in-differences estimation. The second is source-weighted real exchange rates defined at the industry level. Based on both empirical strategies, and two definitions of skill, the paper shows that international competition increases returns to skill and induces skill/occupation upgrading within industries.

Education --- Industry --- International Economics and Trade --- International Trade --- Labor Market Adjustment --- Labor Markets --- Labor Skills --- Skill Acquisition --- Social Protections and Labor --- Trade Adjustment --- Trade and Labor

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This paper investigates the relationship between location, agglomeration, access to credit, informality, and productivity across cities and industries in Cameroon. Emphasizing the link between micro-foundations and the data, the paper develops and estimates a structural model of occupational choice in which heterogeneous agents choose between formal entrepreneurship, informal entrepreneurship, and non-entrepreneurial work. Their decision-making process is driven by institutional constraints such as entry costs, tax enforcement, and access to credit. The model predicts that agglomeration has a non-monotonic effect on formalization, and entrepreneurial profits increase with agglomeration effects. Estimating the model by the generalized method of moments, the paper finds that the returns to capital and labor are not uniform across sectors and cities. Manufacturing industries are highly constrained in capital and the elasticity of capital is higher in Yaounde and Douala, whereas labor elasticity is higher in Kribi. Counterfactual simulations show that an increase in roads provision can have a substantial impact in terms of output, formalization, and productivity. A reduction in the current interest rate has a large and significant impact on formalization and no significant effect on business creation. Likewise, while the current tax rate is suboptimal for most cities, a tax reduction policy would have a much greater impact on formalization than on business creation. These effects differ substantially across cities and sectors, suggesting that those policy instruments could be implemented accordingly to support formalization and business creation.

Access to Credit --- Access to Finance --- Business Creation --- Business Cycles and Stabilization Policies --- Common Carriers Industry --- Construction Industry --- Food and Beverage Industry --- General Manufacturing --- Industry --- Labor Markets --- Labor Skills --- Law and Development --- Macroeconomics and Economic Growth --- Marketing --- Occupation --- Plastics and Rubber Industry --- Private Sector Development --- Private Sector Development Law --- Private Sector Economics --- Productivity --- Pulp and Paper Industry --- Social Protections and Labor --- Tax Rate --- Textiles Apparel and Leather Industry