Advanced Search
MyIDEAS: Login to save this paper or follow this series

Trade, wages, and profits

Contents:

Author Info

  • Egger, Hartmut
  • Egger, Peter
  • Kreickemeier, Udo

Abstract

This paper formulates a structural empirical model of heterogeneous firms whose workers exhibit fair-wage preferences. In the underlying theoretical framework, such preferences lead to a link between a firm's operating profits on the one hand and wages of workers employed by this firm on the other hand. The latter establishes an exporter wage premium, since exporters have higher profits, given their productivity, than non-exporting firms. We estimate the parameters of the model in a data-set of five European economies and find that, when evaluated at these parameter values, the model has a high level of explanatory power. The estimates also enable us to quantify the exporter wage premium and the consequences of trade for the main variables of interest. According to our results, openness to international trade contributes to greater inequality across firms in terms of both operating profits and average wages. We also find evidence for gains from trade for all five countries, which go along with negative, but quantitatively moderate, aggregate employment effects. --

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://econstor.eu/bitstream/10419/54732/1/680557911.pdf
Download Restriction: no

Bibliographic Info

Paper provided by University of Tuebingen, Faculty of Economics and Social Sciences in its series University of Tuebingen Working Papers in Economics and Finance with number 23.

as in new window
Length:
Date of creation: 2011
Date of revision:
Handle: RePEc:zbw:tuewef:23

Contact details of provider:
Postal: Keplerstr. 17, 72074 Tübingen
Phone: 07071/29-72563
Fax: 07071/29-5179
Email:
Web page: http://www.wiwi.uni-tuebingen.de/
More information through EDIRC

Related research

Keywords: structural models; heterogeneous firms; fair wages; labour market imperfections; exporter wage premium;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 70(2), pages 317-341, 04.
  2. Agell, Jonas & Lundborg, Per, 1995. "Fair Wages in the Open Economy," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 62(247), pages 335-51, August.
  3. Costas Arkolakis, 2008. "Market Penetration Costs and the New Consumers Margin in International Trade," NBER Working Papers 14214, National Bureau of Economic Research, Inc.
  4. Jakob Roland Munch & Jan Rose Skaksen, 2006. "Human Capital and Wages in Exporting Firms," EPRU Working Paper Series, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics 06-10, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  5. Hartmut Egger & Udo Kreickemeier, 2007. "Firm Heterogeneity and the Labour Market Effects of Trade Liberalisation," CESifo Working Paper Series 2000, CESifo Group Munich.
  6. John W. Budd & Jozef Konings & Matthew J. Slaughter, 2002. "Wages and International Rent Sharing in Multinational Firms," William Davidson Institute Working Papers Series 522, William Davidson Institute at the University of Michigan.
  7. Felbermayr, Gabriel & Prat, Julien & Schmerer, Hans-Jörg, 2011. "Trade and unemployment: What do the data say?," Munich Reprints in Economics, University of Munich, Department of Economics 20381, University of Munich, Department of Economics.
  8. David Weinstein & Christian Broda, 2004. "Globalization and the Gains from Variety," 2004 Meeting Papers 530, Society for Economic Dynamics.
  9. Jean-Pierre Danthine & André Kurmann, 2005. "The Macroeconomic Consequences of Reciprocity in Labor Relations," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP), Université de Lausanne, Faculté des HEC, DEEP 05.08, Université de Lausanne, Faculté des HEC, DEEP.
  10. John W. Budd & Jozef Konings & Matthew J. Slaughter, . "International Rent Sharing in Multinational Firms," Working Papers, Human Resources and Labor Studies, University of Minnesota (Twin Cities Campus) 0202, Human Resources and Labor Studies, University of Minnesota (Twin Cities Campus).
  11. Naércio Aquino Menezes-Filho & Marc-Andreas Muendler, 2011. "Labor Reallocation in Response to Trade Reform," NBER Working Papers 17372, National Bureau of Economic Research, Inc.
  12. Elhanan Helpman & Oleg Itskhoki & Stephen Redding, 2008. "Inequality and Unemployment in a Global Economy," NBER Working Papers 14478, National Bureau of Economic Research, Inc.
  13. Brander, James A. & Spencer, Barbara J., 1988. "Unionized oligopoly and international trade policy," Journal of International Economics, Elsevier, Elsevier, vol. 24(3-4), pages 217-234, May.
  14. Schank, Thorsten & Schnabel, Claus & Wagner, Joachim, 2007. "Do exporters really pay higher wages? First evidence from German linked employer-employee data," Journal of International Economics, Elsevier, Elsevier, vol. 72(1), pages 52-74, May.
  15. Dutt, Pushan & Mitra, Devashish & Ranjan, Priya, 2009. "International trade and unemployment: Theory and cross-national evidence," Journal of International Economics, Elsevier, Elsevier, vol. 78(1), pages 32-44, June.
  16. Hosios, Arthur J, 1990. "Factor Market Search and the Structure of Simple General Equilibrium Models," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(2), pages 325-55, April.
  17. Daniel Trefler, 2001. "The Long and Short of the Canada-U.S. Free Trade Agreement," NBER Working Papers 8293, National Bureau of Economic Research, Inc.
  18. Costas Arkolakis & Marc-Andreas Muendler, 2010. "The Extensive Margin of Exporting Products: A Firm-level Analysis," CESifo Working Paper Series 3309, CESifo Group Munich.
  19. Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1988. "The Structure of Simple General Equilibrium Models with Frictional Unemployment," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 96(6), pages 1267-93, December.
  20. 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.
  21. Bernard, A., 1997. "Exceptional Exporter Performance: Cause, Effect, or Both?," Working papers 97-21, Massachusetts Institute of Technology (MIT), Department of Economics.
  22. Michael Pfaffermayr & Peter Egger & Andrea Weber, 2007. "Sectoral adjustment of employment to shifts in outsourcing and trade: evidence from a dynamic fixed effects multinomial logit model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 22(3), pages 559-580.
  23. Matusz, Steven J, 1996. "International Trade, the Division of Labor, and Unemployment," 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. 37(1), pages 71-84, February.
  24. Revenga, Ana, 1997. "Employment and Wage Effects of Trade Liberalization: The Case of Mexican Manufacturing," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 15(3), pages S20-43, July.
  25. Brecher, Richard A, 1974. "Minimum Wage Rates and the Pure Theory of International Trade," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 88(1), pages 98-116, February.
  26. Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1999. "Trade and search generated unemployment," Journal of International Economics, Elsevier, Elsevier, vol. 48(2), pages 271-299, August.
  27. Daniel M. Bernhofen & John C. Brown, 2005. "An Empirical Assessment of the Comparative Advantage Gains from Trade: Evidence from Japan," American Economic Review, American Economic Association, American Economic Association, vol. 95(1), pages 208-225, March.
  28. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3381, C.E.P.R. Discussion Papers.
  29. Stephen Redding & Oleg Itskhoki & Marc-Andreas Muendler & Elhanan Helpman, 2012. "Trade and Inequality: From Theory to Estimation," 2012 Meeting Papers, Society for Economic Dynamics 135, Society for Economic Dynamics.
  30. Michael W. Klein & Christoph Moser & Dieter M. Urban, 2010. "The Contribution of Trade to Wage Inequality: The Role of Skill, Gender, and Nationality," NBER Working Papers 15985, National Bureau of Economic Research, Inc.
  31. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
  32. DEL GATTO, Massimo & MION, Giordano & OTTAVIANO, Gianmarco I.P., 2006. "Trade integration, firm selection and the costs of non-Europe," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2006061, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  33. Alvarez, Fernando & Lucas, Robert Jr., 2007. "General equilibrium analysis of the Eaton-Kortum model of international trade," Journal of Monetary Economics, Elsevier, Elsevier, vol. 54(6), pages 1726-1768, September.
  34. Peter Egger & David Greenaway & Tobias Seidel, 2011. "Rigid labour markets with trade and capital mobility: theory and evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 44(2), pages 509-540, May.
  35. Hartmut Egger & Udo Kreickemeier, 2008. "Fairness, Trade, and Inequality," CESifo Working Paper Series 2344, CESifo Group Munich.
  36. Davis, Donald R. & Harrigan, James, 2011. "Good jobs, bad jobs, and trade liberalization," Journal of International Economics, Elsevier, Elsevier, vol. 84(1), pages 26-36, May.
  37. Erhan Artuc & Shubham Chaudhuri & John McLaren, 2007. "Trade Shocks and Labor Adjustment: A Structural Empirical Approach," NBER Working Papers 13465, National Bureau of Economic Research, Inc.
  38. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, American Economic Association, vol. 74(3), pages 433-44, June.
  39. Rauch, James E., 1991. "Modelling the informal sector formally," Journal of Development Economics, Elsevier, Elsevier, vol. 35(1), pages 33-47, January.
  40. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, Econometric Society, vol. 70(5), pages 1741-1779, September.
  41. Mary Amiti & Donald R. Davis, 2012. "Trade, Firms, and Wages: Theory and Evidence," Review of Economic Studies, Oxford University Press, vol. 79(1), pages 1-36.
  42. Akerlof, George A & Yellen, Janet L, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 105(2), pages 255-83, May.
  43. Steven J. Matusz, 1994. "International Trade Policy in a Model of Unemployment and Wage Differentials," Canadian Journal of Economics, Canadian Economics Association, vol. 27(4), pages 939-49, November.
  44. 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.
  45. Brecher, Richard A & Long, Ngo Van, 1989. "Trade Unions in an Open Economy: A General Equilibrium Analysis," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 65(190), pages 234-39, September.
  46. Pinelopi Koujianou Goldberg & Nina Pavcnik, 2005. "Short-term Consequences of Trade Reform for Industry Employment and Wages: Survey of Evidence from Colombia," The World Economy, Wiley Blackwell, vol. 28(7), pages 923-939, 07.
  47. Michael W. Klein & Scott Schuh & Robert K. Triest, 2003. "Job Creation, Job Destruction, and International Competition," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, W.E. Upjohn Institute for Employment Research, number jcjd.
  48. 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.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Hauptmann, Andreas & Schmerer, Hans-Jörg, 2013. "Do exporters pay fair-wage premiums?," Economics Letters, Elsevier, Elsevier, vol. 121(2), pages 179-182.
  2. Klein, Michael W. & Moser, Christoph & Urban, Dieter M., 2013. "Exporting, skills and wage inequality," Labour Economics, Elsevier, Elsevier, vol. 25(C), pages 76-85.
  3. Gabriel J. Felbermayr & Giammario Impullitti & Julien Prat, 2014. "Firm Dynamics and Residual Inequality in Open Economies," CESifo Working Paper Series 4666, CESifo Group Munich.
  4. 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].
  5. Egger, Hartmut & Kreickemeier, Udo, 2012. "Fairness, trade, and inequality," Journal of International Economics, Elsevier, Elsevier, vol. 86(2), pages 184-196.
  6. Stephen Redding & Oleg Itskhoki & Marc-Andreas Muendler & Elhanan Helpman, 2012. "Trade and Inequality: From Theory to Estimation," 2012 Meeting Papers, Society for Economic Dynamics 135, Society for Economic Dynamics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:zbw:tuewef:23. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.