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Worker-Specific Effects of Globalisation

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  • Hartmut Egger
  • Udo Kreickemeier

Abstract

This paper sets up a general equilibrium model in which firms differ in their productivity, and workers have fairness preferences and hence provide full effort only if their wage is sufficiently high. With the wage considered fair by workers depending on the operating profits of the firm in which they are employed, more productive firms pay higher wages. We study trade between two symmetric countries. Exporters have higher operating profits, leading to an exporter wage premium. There are worker-specific effects of trade due to both the exporter wage premium and a reallocation of workers between firms.

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Bibliographic Info

Paper provided by University of Nottingham, GEP in its series Discussion Papers with number 09/23.

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Handle: RePEc:not:notgep:09/23

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Keywords: Heterogeneous firms; Wage inequality; Fair wages; Involuntary unemployment;

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References

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  1. Ernst Fehr & Simon Gaechter, 2000. "Fairness and Retaliation: The Economics of Reciprocity," CESifo Working Paper Series, CESifo Group Munich 336, CESifo Group Munich.
  2. Akerlof, George A & Yellen, Janet L, 1988. "Fairness and Unemployment," American Economic Review, American Economic Association, American Economic Association, vol. 78(2), pages 44-49, May.
  3. Donald R. Davis & James Harrigan, 2007. "Good jobs, bad jobs, and trade liberalization," Discussion Papers, Columbia University, Department of Economics 0607-07, Columbia University, Department of Economics.
  4. Mary Amiti & Donald R. Davis, 2008. "Trade, Firms, and Wages: Theory and Evidence," NBER Working Papers 14106, National Bureau of Economic Research, Inc.
  5. Hartmut Egger & Udo Kreickemeier, 2009. "Firm Heterogeneity And The Labor Market Effects Of Trade Liberalization," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(1), pages 187-216, 02.
  6. Elhanan Helpman & Oleg Itskhoki & Stephen Redding, 2010. "Inequality and Unemployment in a Global Economy," Econometrica, Econometric Society, Econometric Society, vol. 78(4), pages 1239-1283, 07.
  7. Hartmut Egger & Udo Kreickemeier, 2008. "Fairness, Trade, and Inequality," CESifo Working Paper Series, CESifo Group Munich 2344, CESifo Group Munich.
  8. Arai, Mahmood, 1999. "Wages, Profits and Capital Intensity: Evidence from Matched Worker-Firm Data," Research Papers in Economics, Stockholm University, Department of Economics 1999:3, Stockholm University, Department of Economics.
  9. Sofronis K. Clerides & Saul Lach & James R. Tybout, 1998. "Is Learning By Exporting Important? Micro-Dynamic Evidence From Colombia, Mexico, And Morocco," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 113(3), pages 903-947, August.
  10. Peter Howitt, 2002. "Looking Inside the Labor Market: A Review Article," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 40(1), pages 125-138, March.
  11. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, American Economic Association, vol. 72(3), pages 389-405, June.
  12. Jean-Pierre Danthine & André Kurmann, 2005. "The Macroeconomic Consequences of Reciprocity in Labor Relations," Levine's Bibliography 784828000000000299, UCLA Department of Economics.
  13. Hilderth, A.K. & Oswald, A.J., 1993. "Rent-Sharing and Wages: Evidence form Company and Establishment Panels," Economics Series Working Papers, University of Oxford, Department of Economics 99154, University of Oxford, Department of Economics.
  14. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
  15. Barth, Erling & Lucifora, Claudio, 2006. "Wage Dispersion, Markets and Institutions: The Effects of the Boom in Education on the Wage Structure," IZA Discussion Papers 2181, Institute for the Study of Labor (IZA).
  16. Giulia Faggio & Kjell G. Salvanes & John Van Reenen, 2010. "The evolution of inequality in productivity and wages: panel data evidence," Industrial and Corporate Change, Oxford University Press, Oxford University Press, vol. 19(6), pages 1919-1951, December.
  17. Andrew B. Bernard & J. Bradford Jensen, 1997. "Exceptional Exporter Performance: Cause, Effect, or Both?," NBER Working Papers 6272, National Bureau of Economic Research, Inc.
  18. David G. Blanchflower & Andrew J. Oswald & Peter Sanfey, 1992. "Wages, Profits and Rent-Sharing," NBER Working Papers 4222, National Bureau of Economic Research, Inc.
  19. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 97(4), pages 543-69, November.
  20. Kenneth R. Troske & Kimberly Bayard, 1999. "Examining the Employer-Size Wage Premium in the Manufacturing, Retail Trade, and Service Industries Using Employer-Employee Matched Data," American Economic Review, American Economic Association, American Economic Association, vol. 89(2), pages 99-103, May.
  21. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, Econometric Society, vol. 71(6), pages 1695-1725, November.
  22. Richard Baldwin, 2005. "Heterogeneous Firms and Trade: Testable and Untestable Properties of the Melitz Model," NBER Working Papers 11471, National Bureau of Economic Research, Inc.
  23. Thorsten Schank & Claus Schnabel & Joachim Wagner, 2006. "Do exporters really pay higher wages? First evidence from German linked employer-employee data," Working Paper Series in Economics, University of Lüneburg, Institute of Economics 28, University of Lüneburg, Institute of Economics.
  24. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2008. "Trends in U.S. Wage Inequality: Revising the Revisionists," The Review of Economics and Statistics, MIT Press, MIT Press, vol. 90(2), pages 300-323, May.
  25. Kreickemeier, Udo & Nelson, Douglas, 2006. "Fair wages, unemployment and technological change in a global economy," Journal of International Economics, Elsevier, Elsevier, vol. 70(2), pages 451-469, December.
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Citations

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Cited by:
  1. Alessia LO TURCO & Daniela MAGGIONI & Matteo PICCHIO, 2012. "Offshoring and Job Stability: Evidence from Italian Manufacturing," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales), Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) 2012007, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  2. Daniel Baumgarten, 2010. "Exporters and the Rise in Wage Inequality – Evidence from German Linked Employer-Employee Data," Ruhr Economic Papers, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen 0217, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  3. Achim Schmillen, 2011. "The Exporter Wage Premium Reconsidered - Destinations, Distances and Linked Employer-Employee Data," Working Papers, Bavarian Graduate Program in Economics (BGPE) 111, Bavarian Graduate Program in Economics (BGPE).
  4. Braun, Sebastian, 2011. "Unionisation structures, productivity and firm performance: New insights from a heterogeneous firm model," Labour Economics, Elsevier, Elsevier, vol. 18(1), pages 120-129, January.

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