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Wage Effects of Trade Reform with Endogenous Worker Mobility

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  • Pravin Krishna
  • Jennifer P. Poole
  • Mine Zeynep Senses

Abstract

In this paper, we use a linked employer–employee database from Brazil to evaluate the wage effects of trade reform. With an aggregate (firm-level) analysis of this question, we find that a decline in trade protection is associated with an increase in average wages in exporting firms relative to domestic firms, consistent with earlier studies. However, using disaggregated, employer-employee level data, and allowing for the endogenous assignment of workers to firms due to match-specific productivity, we find that the premium paid to workers at exporting firms is economically and statistically insignificant, as is the differential impact of trade openness on the wages of workers at exporting firms relative to otherwise identical workers at domestic firms. We also find that workforce composition improves systematically in exporting firms, in terms of the combination of worker ability and the quality of worker-firm matches, post-liberalization. These results stand in stark contrast to the findings reported in many earlier studies and underscore the importance of endogenous matching and, more generally, non-random labor market allocation mechanisms, in determining the effects of trade policy changes on wages.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17256.

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Date of creation: Jul 2011
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Handle: RePEc:nbr:nberwo:17256

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References

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Citations

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Cited by:
  1. Daniel Baumgarten, 2010. "Exporters and the Rise in Wage Inequality – Evidence from German Linked Employer-Employee Data," Ruhr Economic Papers 0217, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  2. Macis, Mario & Schivardi, Fabiano, 2012. "Exports and Wages: Rent Sharing, Workforce Composition or Returns to Skills?," CEPR Discussion Papers 8931, C.E.P.R. Discussion Papers.
  3. Paz, Lourenço S., 2014. "The impacts of trade liberalization on informal labor markets: A theoretical and empirical evaluation of the Brazilian case," Journal of International Economics, Elsevier, vol. 92(2), pages 330-348.
  4. Winters, L. Alan, 2014. "Globalization, Infrastructure, and Inclusive Growth," ADBI Working Papers 464, Asian Development Bank Institute.
  5. Wolfgang Lechthaler & Mariya Mileva, 2013. "Trade Liberalization and Wage Inequality: New Insights from a Dynamic Trade Model with Heterogeneous Firms and Comparative Advantage," Kiel Working Papers 1886, Kiel Institute for the World Economy.
  6. 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.
  7. Almeida, Rita K. & Poole, Jennifer Pamela, 2013. "Trade and Labor Reallocation with Heterogeneous Enforcement of Labor Regulations," IZA Discussion Papers 7358, Institute for the Study of Labor (IZA).
  8. Ina Charlotte Jäkel, 2013. "Import-push or Export-pull? An Industry-level Analysis of the Impact of Trade on Firm Exit," Economics Working Papers 2013-20, School of Economics and Management, University of Aarhus.
  9. 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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