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Wages and International Trade

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Author Info
Kramarz, Francis

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

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Find related papers by JEL classification:
F30 - International Economics - - International Finance - - - General
F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

References listed on IDEAS
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    Other versions:
  2. John M. Abowd & Laurence Allain, 1996. "Compensation Structure and Product Market Competition," Annales d'Economie et de Statistique, ADRES, issue 41-42, pages 10, Janvier-J. [Downloadable!]
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  5. Van Reenen, John, 1994. "The Creation and Capture of Rents: Wages and Innovation in a Panel of UK Companies," CEPR Discussion Papers 1071, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  6. Farber, Henry S., 1999. "Mobility and stability: The dynamics of job change in labor markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 37, pages 2439-2483 Elsevier. [Downloadable!] (restricted)
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  10. 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. [Downloadable!] (restricted)
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  11. Marianne Bertrand, 1999. "From the Invisible Handshake to the Invisible Hand? How Import Competition Changes the Employment Relationship," NBER Working Papers 6900, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  13. John M. Abowd & Francis Kramarz & David N. Margolis, 1994. "High-Wage Workers and High-Wage Firms," CIRANO Working Papers 94s-23, CIRANO. [Downloadable!]
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  14. Paul Krugman, 1995. "Growing World Trade: Causes and Consequences," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1995-1), pages 327-377. [Downloadable!]
  15. Linda Goldberg & Joseph Tracy, 2001. "Exchange Rates and Wages," NBER Working Papers 8137, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  16. 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. [Downloadable!] (restricted)
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  19. Freeman, Richard B, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer. [Downloadable!] (restricted)
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  21. John M. Abowd & Laurence Allain, 1996. "Compensation Structure and Product Market Competition," NBER Working Papers 5493, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  22. Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics. [Downloadable!]
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  24. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Natalie Chen & Jean Imbs & Andrew Scott, 2006. "The dynamics of trade and competition," Research series 200610-3, National Bank of Belgium. [Downloadable!]
    Other versions:
  2. Gürtzgen, Nicole, 2005. "Rent-Sharing and Collective Bargaining Coverage ? Evidence from Linked Employer-Employee Data," ZEW Discussion Papers 05-90, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  3. Hervé Boulhol, 2005. "The convergence of price-cost margins," Cahiers de la Maison des Sciences Economiques bla05056, Université Panthéon-Sorbonne (Paris 1). [Downloadable!]
    Other versions:
  4. Filip Abraham & Jozef Konings & Stijn Vanormelingen, 2006. "Price and wage setting in an integrating Europe : firm level evidence," Research series 200610-5, National Bank of Belgium. [Downloadable!]
  5. Martins, Pedro S., 2004. "Rent Sharing Before and After the Wage Bill," IZA Discussion Papers 1376, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  6. Martins, Pedro S., 2004. "Firm-Level Social Returns to Education," IZA Discussion Papers 1382, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  7. Hervé Boulhol, 2005. "Why haven't price-cost margins decreased with globalization ?," Cahiers de la Maison des Sciences Economiques bla06007, Université Panthéon-Sorbonne (Paris 1). [Downloadable!]
  8. Ellen Brock & Sabien Dobbelaere, 2006. "Has International Trade Affected Workers’ Bargaining Power?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 142(2), pages 233-266, July. [Downloadable!] (restricted)
    Other versions:
  9. Pedro S. Martins & Luiz A. Esteves, 2006. "Is There Rent Sharing In Developing Countries? Matched-Panel Evidence from Brazil," IZA Discussion Papers 2317, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  10. Hervé Boulhol, 2006. "Do capital market and trade liberalization trigger labor market deregulation ?," Cahiers de la Maison des Sciences Economiques bla06062, Université Panthéon-Sorbonne (Paris 1). [Downloadable!]
    Other versions:
  11. Lars Calmfors & Giancarlo Corsetti & Michael P. Devereux & Gilles Saint-Paul & Hans-Werner Sinn & Jan-Egbert Sturm & Xavier Vives, 2008. "Chapter 3: The effect of globalisation on Western European jobs: curse or blessing?," EEAG Report on the European Economy, CESifo Group Munich, vol. 0, pages 71-104, 02. [Downloadable!]
  12. Andersen, Torben M & Sorensen, Allan, 2005. "Product Market Integration, Wages and Inequality," CEPR Discussion Papers 4963, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  13. Hervé Boulhol & Sabien Dobbelaere & Sara Maioli, 2006. "Imports as Product and Labor Market Discipline," IZA Discussion Papers 2178, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  14. Filip Abraham & Jozef Konings & Stijn Vanormelingen, 2009. "The effect of globalization on union bargaining and price-cost margins of firms," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 145(1), pages 13-36, April. [Downloadable!] (restricted)
    Other versions:
  15. Alessandra Tucci, 2005. "Trade, Foreign Networks and Performance: a Firm-Level Analysis for India," Development Working Papers 199, Centro Studi Luca d\'Agliano, University of Milano. [Downloadable!]
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