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Firms’ main market, human capital, and wages

  • Francisco Alcalá

    ()

  • Pedro Hernández

    ()

This paper contributes to the recent literature on the exporter wage premium. The literature has focused on an exporter/non-exporter dichotomy. Instead, this paper provides first evidence that there is a more continuous destination-market effect. Using Spanish data, we estimate wage premia for establishments selling to the national, European Union, and rest of the world markets (wages in local-market establishments are the reference). Controlling for worker and establishment characteristics, output-market wage premia are increasing in market remoteness and employee education. Establishment human capital is also increasing in output-market remoteness. On the theoretical side, the paper builds a model predicting that firms selling to 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. The model provides a potential explanation for the empirical results in the paper, which is consistent with the evidence on the positive relationship between output-market remoteness and quality of exports put forward by recent trade literature..

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File URL: http://hdl.handle.net/10.1007/s13209-009-0007-6
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Article provided by 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
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