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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. Klein, Michael W. & Moser, Christoph & Urban, Dieter M., 2013. "Exporting, skills and wage inequality," Labour Economics, Elsevier, vol. 25(C), pages 76-85.
  2. Stephen Redding & Oleg Itskhoki & Marc-Andreas Muendler & Elhanan Helpman, 2012. "Trade and Inequality: From Theory to Estimation," 2012 Meeting Papers 135, Society for Economic Dynamics.
  3. Hartmut Egger & Udo Kreickemeier, . "Fairness, Trade, and Inequality," Discussion Papers 08/19, University of Nottingham, GEP.
  4. Felbermayr, Gabriel & Impullitti, Giammario & Prat, Julien, 2014. "Firm Dynamics and Residual Inequality in Open Economies," CEPR Discussion Papers 9855, C.E.P.R. Discussion Papers.
  5. Hauptmann, Andreas & Schmerer, Hans-Jörg, 2013. "Do exporters pay fair-wage premiums?," Economics Letters, Elsevier, vol. 121(2), pages 179-182.
  6. Felbermayr, Gabriel & Hauptmann, Andreas & Schmerer, Hans-Jörg, 2012. "International trade and collective bargaining outcomes : evidence from German employer-employee data," IAB Discussion Paper 201207, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

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