This study examines effects of India’s trade liberalization on the job matching process (the relationship between job search and new hires) with the use of aggregate matching functions.

India’s case provides a desirable opportunity to examine the effects of trade liberalization on economic outcome (Hasan et. al 2012). The Indian government must follow IMF’s bailout program to overcome a balance of payment crisis in 1991 and thus economic reform including trade liberalization was unanticipated (i.e., exogenous), which researchers can use prior to and after 1991 as a divider to evaluate the effects of economic reform on performance in the Indian economy.

The implication of the results in this research does not differ from the results of past studies (e.g., Hasan et al., 2012). It is inferred that overall, trade liberalization did not influence the job matching process in India, which is shown by the absence of statistical significance between openness or import penetration and new job hires, while controlling for volumes of job-seekers, job vacancies, and other factors. Our findings do not differ from the results of past studies. On the other hand, from the analysis by period, it is shown that new job creation tended to decline when trade liberalization was slowed because of the industries’ demand (phase 2: the period of economic reform that reflected the domestic demand of various firms and industries from 1998 to 2002). This implies the high probability that the gradual opening to protect domestic firms will actually lead to a decrease in new job creation and thus, an increase in unemployment rate. This result recommends that the Indian government continue to promote external economic liberalization.