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Firms’ main market, human capital, and wages

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  • Francisco Alcalá

    ()

  • Pedro Hernández

    ()

Abstract

This paper contributes to the recent literature on the exporter wage premium. The literature has focused on an exporter/non-exporter dichotomy. Instead, this paper provides first evidence that there is a more continuous destination-market effect. Using Spanish data, we estimate wage premia for establishments selling to the national, European Union, and rest of the world markets (wages in local-market establishments are the reference). Controlling for worker and establishment characteristics, output-market wage premia are increasing in market remoteness and employee education. Establishment human capital is also increasing in output-market remoteness. On the theoretical side, the paper builds a model predicting that firms selling to more-remote markets employ higher human capital and pay higher wages to employees within each education group. The channel linking these variables is firms’ endogenous choice of quality. The model provides a potential explanation for the empirical results in the paper, which is consistent with the evidence on the positive relationship between output-market remoteness and quality of exports put forward by recent trade literature..

(This abstract was borrowed from another version of this item.)

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File URL: http://hdl.handle.net/10.1007/s13209-009-0007-6
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Bibliographic Info

Article provided by Spanish Economic Association in its journal SERIEs.

Volume (Year): 1 (2010)
Issue (Month): 4 (September)
Pages: 433-458

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Handle: RePEc:spr:series:v:1:y:2010:i:4:p:433-458

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Related research

Keywords: Wage inequality; International trade; Alchian–Allen effect; Vertical differentiation; F16; J24; J31;

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References

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  1. Thorsten Schank & Claus Schnabel & Joachim Wagner, 2010. "Higher wages in exporting firms: self-selection, export effect, or both? First evidence from linked employer-employee data," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 146(2), pages 303-322, June.
  2. Eric A. Verhoogen, 2008. "Trade, Quality Upgrading, and Wage Inequality in the Mexican Manufacturing Sector," The Quarterly Journal of Economics, MIT Press, vol. 123(2), pages 489-530, 05.
  3. David Hummels & Alexandre Skiba, 2004. "Shipping the Good Apples Out? An Empirical Confirmation of the Alchian-Allen Conjecture," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1384-1402, December.
  4. Andrew Bernard & Joachim Wagner, 1997. "Exports and success in German manufacturing," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 133(1), pages 134-157, March.
  5. Dolado, Juan J. & Felgueroso, Florentino & Jimeno, Juan F., 2000. "Youth labour markets in Spain: Education, training, and crowding-out," European Economic Review, Elsevier, vol. 44(4-6), pages 943-956, May.
  6. Lallemand, Thierry & Plasman, Robert & Rycx, Francois, 2005. "The Establishment-Size Wage Premium: Evidence from European Countries," IZA Discussion Papers 1569, Institute for the Study of Labor (IZA).
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  11. Maurin, Eric & Thesmar, David & Thoenig, Mathias, 2002. "Globalization and the demand for skill: An Export Based Channel," CEPR Discussion Papers 3406, C.E.P.R. Discussion Papers.
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  20. Richard Baldwin & James Harrigan, 2007. "Zeros, Quality and Space: Trade Theory and Trade Evidence," NBER Working Papers 13214, National Bureau of Economic Research, Inc.
  21. Schank, Thorsten & Schnabel, Claus & Wagner, Joachim, 2008. "Higher wages in exporting firms: self-selection, export effect, or both? First evidence from German linked employer-employee data," Discussion Papers 55, Friedrich-Alexander-University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
  22. Kevin M.Shleifer Murphy & Andrei, 1991. "Quality and Trade," University of Chicago - George G. Stigler Center for Study of Economy and State 66, Chicago - Center for Study of Economy and State.
  23. Walter Y. Oi & Todd L. Idson, 1999. "Workers Are More Productive in Large Firms," American Economic Review, American Economic Association, vol. 89(2), pages 104-108, May.
  24. Schank, Thorsten & Schnabel, Claus & Wagner, Joachim, 2007. "Do exporters really pay higher wages? First evidence from German linked employer-employee data," Journal of International Economics, Elsevier, vol. 72(1), pages 52-74, May.
  25. Johnson, Robert C., 2012. "Trade and prices with heterogeneous firms," Journal of International Economics, Elsevier, vol. 86(1), pages 43-56.
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