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Trade, Firms, and Wages: Theory and Evidence

  • Amiti, Mary
  • Davis, Donald R

How does trade liberalization affect wages? This is the first paper to consider in theory and data how the impact of final and intermediate input tariff cuts on workers’ wages varies with the global engagement of their firm. Our model predicts that a fall in output tariffs lowers wages at import-competing firms, but boosts wages at exporting firms. Similarly, a fall in input tariffs raises wages at import-using firms relative to those at firms that only source locally. Using highly detailed Indonesian manufacturing census data for the period 1991 to 2000, we find considerable support for the model’s predictions.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6872.

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Date of creation: Jun 2008
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Handle: RePEc:cpr:ceprdp:6872
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  13. Revenga, Ana, 1997. "Employment and Wage Effects of Trade Liberalization: The Case of Mexican Manufacturing," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages S20-43, July.
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  18. Mary Amiti, 2000. "Trade Liberalisation of Intermediate Inputs," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 33(4), pages 299-302.
  19. Eric A. Verhoogen & Stephen V. Burks & Jeffrey P. Carpenter, 2007. "Fairness and Freight-Handlers: Local Labor-Market Conditions and Wage-Fairness Perceptions in a Trucking Firm," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 60(4), pages 477-498, July.
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  22. Hartmut Egger & Udo Kreickemeier, 2009. "Firm Heterogeneity And The Labor Market Effects Of Trade Liberalization," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(1), pages 187-216, 02.
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  25. Robert C. Feenstra & Gordon H. Hanson, 1999. "The Impact Of Outsourcing And High-Technology Capital On Wages: Estimates For The United States, 1979-1990," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 907-940, August.
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