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Firms’ main market, human capital, and wages

Listed author(s):
  • Francisco Alcalá

    ()

  • Pedro Hernández

    ()

Recent international trade literature emphasizes two features in characterizing the current patterns of trade: efficiency heterogeneity at the firm level and quality differentiation. This paper explores human capital and wage differences across firms in that context. We build a partial equilibrium model predicting that firms selling in more-remote markets employ higher human capital and pay higher wages to employees within each education group. The channel linking these variables is firms’ endogenous choice of quality. Predictions are tested using Spanish employer-employee matched data that classify firms according to four main destination markets: local, national, European Union, and rest of the World. Employees’ average education is increasing in the remoteness of firm’s main output market. Market–destination wage premia are large, increasing in the remoteness of the market, and increasing in individual education. These results suggest that increasing globalization may play a significant role in raising wage inequality within and across education groups.

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File URL: http://hdl.handle.net/10.1007/s13209-009-0007-6
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Article provided by Springer & Spanish Economic Association in its journal SERIEs.

Volume (Year): 1 (2010)
Issue (Month): 4 (September)
Pages: 433-458

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Handle: RePEc:spr:series:v:1:y:2010:i:4:p:433-458
DOI: 10.1007/s13209-009-0007-6
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  24. Thorsten Schank & Claus Schnabel & Joachim Wagner, 2008. "Higher Wages in Exporting Firms: Self-selection, Export Effect, or Both? First Evidence from German Linked Employer-Employee Data," Working Paper Series in Economics 74, University of Lüneburg, Institute of Economics.
  25. Thorsten Schank & Claus Schnabel & Joachim Wagner, 2010. "Higher wages in exporting firms: self-selection, export effect, or both? First evidence from linked employer-employee data," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 146(2), pages 303-322, June.
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