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Firms’ main market, human capital, and wages

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  • Francisco Alcalá

    ()

  • Pedro Hernández

    ()

Abstract

Recent international trade literature emphasizes two features in characterizing the current patterns of trade: efficiency heterogeneity at the firm level and quality differentiation. This paper explores human capital and wage differences across firms in that context. We build a partial equilibrium model predicting that firms selling in 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. Predictions are tested using Spanish employer-employee matched data that classify firms according to four main destination markets: local, national, European Union, and rest of the World. Employees’ average education is increasing in the remoteness of firm’s main output market. Market–destination wage premia are large, increasing in the remoteness of the market, and increasing in individual education. These results suggest that increasing globalization may play a significant role in raising wage inequality within and across education groups.

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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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Cited by:
  1. Wagner, Joachim, 2011. "International Trade and Firm Performance: A Survey of Empirical Studies since 2006," IZA Discussion Papers 5916, Institute for the Study of Labor (IZA).

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