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The Exporter Wage Premium When Firms and Workers Are Heterogeneous

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  • Egger, Hartmut
  • Egger, Peter
  • Kreickemeier, Udo
  • Moser, Christoph

Abstract

We set up a trade model with heterogeneous firms and a worker population that is heterogeneous in two dimensions: workers are either skilled or unskilled, and within each skill category there is a continuum of abilities. Workers with high abilities, both skilled and unskilled, are matched to firms with high productivities, and this leads to wage differentials within each skill category across firms. Self-selection of the most productive firms into exporting generates an exporter wage premium, and our framework with skilled and unskilled workers allows us to decompose this premium into its skill-specific components. We employ linked employer-employee data from Germany to structurally estimate the parameters of the model. Using these parameter estimates, we compute an average exporter wage premium of 5 percent. The decomposition by skill turns out to be quantitatively highly relevant, with exporting firms paying no wage premium at all to their unskilled workers, while the premium for skilled workers is 12 percent.

Suggested Citation

  • Egger, Hartmut & Egger, Peter & Kreickemeier, Udo & Moser, Christoph, 2017. "The Exporter Wage Premium When Firms and Workers Are Heterogeneous," CEPR Discussion Papers 12162, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12162
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    References listed on IDEAS

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    1. CHRIS MILNER & DANNY McGOWAN, 2013. "Trade Costs And Trade Composition," Economic Inquiry, Western Economic Association International, vol. 51(3), pages 1886-1902, July.
    2. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, vol. 42(3-4), pages 371-393, May.
    3. Holger Alda & Stefan Bender & Hermann Gartner, 2005. "European Data Watch: The linked employer-employee dataset created from the IAB establishment panel and the process-produced data of the IAB (LIAB)," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 125(2), pages 327-336.
    4. Thorsten Schank & Claus Schnabel & Joachim Wagner, 2016. "Do Exporters Really Pay Higher Wages? First Evidence from German Linked Employer–Employee Data," World Scientific Book Chapters,in: Microeconometrics of International Trade, chapter 5, pages 177-213 World Scientific Publishing Co. Pte. Ltd..
    5. Hauptmann, Andreas & Schmerer, Hans-Jörg, 2013. "Do exporters pay fair-wage premiums?," Economics Letters, Elsevier, vol. 121(2), pages 179-182.
    6. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    7. James Harrigan & Ariell Reshef, 2015. "Skill-biased heterogeneous firms, trade liberalization and the skill premium," Canadian Journal of Economics, Canadian Economics Association, vol. 48(3), pages 1024-1066, August.
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    More about this item

    Keywords

    Ability differences; Exporter wage premium; Heterogeneous Firms;

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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