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Trade, wages, and profits

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  • Egger, Hartmut
  • Egger, Peter
  • Kreickemeier, Udo

Abstract

This paper formulates a structural empirical model of heterogeneous firms whose workers exhibit fair-wage preferences, leading to a link between a firm's operating profits and wages of workers employed by this firm. We estimate the parameters of the model in a dataset of five European economies. The model predicts an exporter wage premium, which we find to be sizable in all countries, with nearly 6% on average. The estimates enable us to conduct counterfactual exercises. We find that openness to international trade has quantitatively important effects, leading to higher wage inequality and lower aggregate employment.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 64 (2013)
Issue (Month): C ()
Pages: 332-350

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Handle: RePEc:eee:eecrev:v:64:y:2013:i:c:p:332-350

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Keywords: Structural models; Heterogeneous firms; Fair wages; Labour market imperfections; Exporter wage premium;

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Citations

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Cited by:
  1. Elhanan Helpman & Oleg Itskhoki & Marc-Andreas Muendler & Stephen J. Redding, 2012. "Trade and Inequality: From Theory to Estimation," NBER Working Papers 17991, National Bureau of Economic Research, Inc.
  2. Egger, Hartmut & Kreickemeier, Udo, 2012. "Fairness, trade, and inequality," Journal of International Economics, Elsevier, Elsevier, vol. 86(2), pages 184-196.
  3. Gabriel J. Felbermayr & Andreas Hauptmann & Hans-Jörg Schmerer, 2012. "International Trade and Collective Bargaining Outcomes: Evidence from German Employer-Employee Data," Ifo Working Paper Series Ifo Working Paper No. 130, Ifo Institute for Economic Research at the University of Munich.
  4. Gabriel Felbermayr & Giammario Impullitti & Julien Prat, 2014. "Firm Dynamics and Residual Inequality in Open Economies," Discussion Papers 2014-01, University of Nottingham, GEP.
  5. Klein, Michael W. & Moser, Christoph & Urban, Dieter M., 2013. "Exporting, skills and wage inequality," Labour Economics, Elsevier, Elsevier, vol. 25(C), pages 76-85.
  6. Hauptmann, Andreas & Schmerer, Hans-Jörg, 2013. "Do exporters pay fair-wage premiums?," Economics Letters, Elsevier, vol. 121(2), pages 179-182.

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