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Trade, Wages, and Profits

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  • Hartmut Egger
  • Peter Egger
  • Udo Kreickemeier

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 data-set of five European economies. The model predicts an exporter wage premium, which we find to be sizable in all countries, with nearly 10 percent 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

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3911.

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Date of creation: 2012
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Handle: RePEc:ces:ceswps:_3911

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Keywords: structural models; heterogeneous firms; fair wages; labour market imperfections; exporter wage premium;

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References

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Citations

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Cited by:
  1. Felbermayr, Gabriel & Impullitti, Giammario & Prat, Julien, 2014. "Firm Dynamics and Residual Inequality in Open Economies," IZA Discussion Papers 7960, Institute for the Study of Labor (IZA).
  2. 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.
  3. Hartmut Egger & Udo Kreickemeier, . "Fairness, Trade, and Inequality," Discussion Papers 08/19, University of Nottingham, GEP.
  4. Elhanan Helpman & Oleg Itskhoki & Marc-Andreas Muendler & Stephen Redding, 2012. "Trade and Inequality: From Theory to Estimation," CEP Discussion Papers dp1138, Centre for Economic Performance, LSE.
  5. Hauptmann, Andreas & Schmerer, Hans-Jörg, 2013. "Do exporters pay fair-wage premiums?," Economics Letters, Elsevier, vol. 121(2), pages 179-182.
  6. Klein, Michael W. & Moser, Christoph & Urban, Dieter M., 2013. "Exporting, skills and wage inequality," Labour Economics, Elsevier, vol. 25(C), pages 76-85.

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