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Heterogeneous Firms or Heterogeneous Workers? Implications for Exporter Premiums and the Gains from Trade

Author

Listed:
  • Alfonso Irarrazabal

    (Norges Bank)

  • Andreas Moxnes

    (Dartmouth College and BI Norwegian Business School)

  • Karen Helene Ulltveit-Moe

    (University of Oslo and CEPR)

Abstract

We investigate to what extent worker heterogeneity explains the well-known wage and productivity exporter premiums, employing a matched employer-employee data set for Norwegian manufacturing. The wage premium falls by roughly 50% after controlling for observed and unobserved worker characteristics, while the total factor productivity premium falls by 25% to 40%, suggesting that sorting explains up to half of these premiums. Recent trade models emphasize the role of within-industry reallocation of labor in response to various shocks to the economy. Our findings suggest that aggregate productivity gains due to reallocation may be overstated if not controlling for sorting between firms and workers. © 2013 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Alfonso Irarrazabal & Andreas Moxnes & Karen Helene Ulltveit-Moe, 2013. "Heterogeneous Firms or Heterogeneous Workers? Implications for Exporter Premiums and the Gains from Trade," The Review of Economics and Statistics, MIT Press, vol. 95(3), pages 839-849, July.
  • Handle: RePEc:tpr:restat:v:95:y:2013:i:3:p:839-849
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    Citations

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    Cited by:

    1. Martins, Pedro S. & Opromolla, Luca David, 2011. "Why Ex(Im)porters Pay More: Evidence from Matched Firm-Worker Panels," IZA Discussion Papers 6013, Institute for the Study of Labor (IZA).
    2. Jonathan EATON & Samuel KORTUM & Francis KRAMARZ, 2016. "Firm-to-Firm Trade: Imports, exports, and the labor market," Discussion papers 16048, Research Institute of Economy, Trade and Industry (RIETI).
    3. Michel Serafinelli, 2015. "'Good' Firms, Worker Flows and Local Productivity," Working Paper series 15-29, Rimini Centre for Economic Analysis.
    4. Joachim Wagner, 2011. "Productivity and International Firm Activities: What do we know?," Working Paper Series in Economics 194, University of Lüneburg, Institute of Economics.
    5. Gu, Grace Weishi & Malik, Samreen & Pozzoli, Dario & Rocha, Vera, 2016. "Trade Induced Skill Upgrading: Lessons from the Danish and Portuguese Experiences," IZA Discussion Papers 10035, Institute for the Study of Labor (IZA).
    6. Parrotta, Pierpaolo & Pozzoli, Dario & Pytlikova, Mariola, 2014. "Labor diversity and firm productivity," European Economic Review, Elsevier, vol. 66(C), pages 144-179.
    7. Bent Christensen & Jesper Bagger, 2014. "Wage and Productivity Dispersion: The Roles of Rent Sharing, Labor Quality and Capital Intensity," 2014 Meeting Papers 473, Society for Economic Dynamics.
    8. Martins, Pedro S. & Opromolla, Luca David, 2011. "Why Ex(Im)porters Pay More: Evidence from Matched Firm-Worker Panels," IZA Discussion Papers 6013, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    exports; total factor productivity; input quality; firm heterogeneity; linked employer-employee data;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F10 - International Economics - - Trade - - - General
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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