Trade exposure, survival and growth of small and medium-size firms

Abstract

In this paper we analyze the relationship between survival, employment growth and firm size in Chile, an economy that has reduced largely its trade barriers in the last three decades. We are particularly interested in analyzing whether the small and medium sized enterprises (SMEs) in the manufacturing sector have experienced negative effects on their survival probability and employment growth over time. Our results do not suggest that higher trade exposure affects negatively the SMEs performance. To better identify these effects, we exploit differences in trade flows across manufacturing industries. We find that SMEs are more likely to survive in industries with higher exposure to international trade. In terms of employment growth, we do not find that SMEs are more negatively affected by higher international competition.