THRESHOLD EFFECTS OF FOREIGN TRADE AND LABOR PRODUCTIVITY: AN EMPIRICAL STUDY
DOI:
https://doi.org/10.17721/1728-2667.2026/229-2/17Keywords:
labor productivity, threshold regression, exports, imports, systematic threshold, import dependence, martial lawAbstract
Background. This article investigates the non-linear impact of export and import activities on the labor productivity of Ukrainian SMEs under conditions of extreme macroeconomic volatility (2017–2024), encompassing the COVID-19 pandemic and the full-scale war. The study identifies structural breakpoints that distinguish early-stage internationalization from integrated operations amidst wartime disruptions.
Methods. The research utilizes a panel data threshold regression methodology to endogenously identify structural breaks. The model accounts for individual fixed effects to control for unobserved firm-level heterogeneity. The study accounts for limitations arising from the small sample size (30 observations) and the impact of forced reclassification of firms by size due to mass labor migration and mobilization during the full-scale invasion.
Results. The empirical analysis indicates that the relationship between productivity and personnel costs is moderated by international intensity. For the export model (R2 = 0.539), a threshold of 7.5% in total sales was identified. Below this point, enterprises experience an initial high-return regime with high marginal returns (β1 = 833.72). Beyond this threshold, returns diminish (β2 = 726.85), suggesting that further growth requires deep technological integration. In the import model (R2 = 0.508), a systemic threshold of 17.5% was identified. A technology-driven productivity premium was identified in the second regime, where labor efficiency increases by 25%, driven by the integration of foreign high-tech intermediate goods into production processes.
Conclusions. Findings suggest a shift in economic policy toward targeted interventions. For enterprises below the 7.5% export threshold, support should focus on lowering entry barriers via Export Credit Agencies. For those exceeding this limit, policy should shift toward R&D incentives. Regarding imports, the study advocates for the selective liberalization of customs barriers for high-tech resources, facilitating the crossing of the 17.5% efficiency barrier. These recommendations provide policy directions for strengthening economic resilience amidst the full-scale war.
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