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Wages and International Trade

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  • Kramarz, Francis

Abstract

In this Paper, I present direct micro-econometric evidence of the relation between individual wages of French workers and the import behaviour of their employing firms. First, a model shows that the impact of firms’ imports on workers’ wages not only comes from movements in the quasi-rent induced by competitive pressures but also from alterations of workers and firms threat points in the bargaining process induced by trade. To estimate this model, I use a unique matched employer-employee data source that contains information on firms’ inputs, including imports by type of product and by country of origin, as well as individual characteristics of a representative sample of workers employed at those firms. Because the quasi-rent - a firm-level variable - and seniority - a person-level variable directly affected by import competition are endogenous in the wage equation, I use export prices of US firms to various destinations as instruments. To summarize my results, I find a bargaining power below 0.20. I also show that workers’ wages deteriorate through competitive pressures. Two effects are at play. In industries where firms actively import finished goods, workers’ wage is decreased. But, firms own imports of the same goods ‘protect’ its workers through a hold-up effect. The total effect is negative for most workers. Highly educated workers appear to benefit from trade, in stark contrast with less educated workers. Also, very experienced workers, when still employed in manufacturing firms, appear to benefit from the hold-up effect but to be most affected by the firm’s competitor’s imports.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3936.

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Date of creation: Jun 2003
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Handle: RePEc:cpr:ceprdp:3936

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Keywords: bargaining; competition; imports; internationaltrade; wages;

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References

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  1. Bernard, Andrew B. & Jensen, J. Bradford, 1997. "Exporters, skill upgrading, and the wage gap," Journal of International Economics, Elsevier, vol. 42(1-2), pages 3-31, February.
  2. John M. Abowd & Robert H. Creecy & Francis Kramarz, 2002. "Computing Person and Firm Effects Using Linked Longitudinal Employer-Employee Data," Longitudinal Employer-Household Dynamics Technical Papers 2002-06, Center for Economic Studies, U.S. Census Bureau.
  3. Revenga, Ana L, 1992. "Exporting Jobs? The Impact of Import Competition on Employment and Wages in U.S. Manufacturing," The Quarterly Journal of Economics, MIT Press, vol. 107(1), pages 255-84, February.
  4. Abowd, John M & Lemieux, Thomas, 1993. "The Effects of Product Market Competition on Collective Bargaining Agreements: The Case of Foreign Competition in Canada," The Quarterly Journal of Economics, MIT Press, vol. 108(4), pages 983-1014, November.
  5. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "High Wage Workers and High Wage Firms," Econometrica, Econometric Society, vol. 67(2), pages 251-334, March.
  6. John M. Abowd & Francis Kramarz, 1992. "A Test of Negotiation and Incentive Compensation Models Using Longitudinal French Enterprise Data," NBER Working Papers 4044, National Bureau of Economic Research, Inc.
  7. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June.
  8. Johnson, George & Stafford, Frank, 1999. "The labor market implications of international trade," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 34, pages 2215-2288 Elsevier.
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