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Heterogeneous firms or heterogeneous workers? Implications for the exporter premium and the impact of labor reallocation on pro

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  • Ulltveit-Moe, Karen Helene
  • Moxnes, Andreas
  • Irarrazabal, Alfonso

Abstract

We expect trade liberalization to give rise to aggregate productivity gains, as the least efficient firms are forced out, and labor is reallocated towards the best performing firms. But the positive intra-industry reallocation effects rely on the stark assumption that exporters? superior performance is due to intrinsic firm efficiency. We investigate the importance of intrinsic firm efficiency relative to input quality as sources of exporters? productivity premium, employing a matched employer-employee data set for Norwegian manufacturing. Augmented measures of total factor productivity which take worker characteristics into account, indicate that up to 67 percent of the exporter premium reflects differences in workforce rather than true efficiency. Simulating the labor dynamics proceeding firm exits, we illustrate that the benign impact on aggregate productivity from firm exits may be reduced because of worker reallocation.

Suggested Citation

  • Ulltveit-Moe, Karen Helene & Moxnes, Andreas & Irarrazabal, Alfonso, 2009. "Heterogeneous firms or heterogeneous workers? Implications for the exporter premium and the impact of labor reallocation on pro," CEPR Discussion Papers 7577, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:7577
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    Cited by:

    1. Mikael Carlsson & Julián Messina & Oskar Nordström Skans, 2016. "Wage Adjustment and Productivity Shocks," Economic Journal, Royal Economic Society, vol. 126(595), pages 1739-1773, September.
    2. Fabien Candau & Elisa Dienesch, 2015. "Spatial distribution of skills and regional trade integration," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 54(2), pages 451-488, March.
    3. Jan Eeckhout & Roberto Pinheiro, 2014. "Diverse Organizations And The Competition For Talent," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(3), pages 625-664, August.
    4. Bøler, Esther Ann & Javorcik, Beata & Ulltveit-Moe, Karen Helene, 2015. "Globalization: a woman’s best friend? Exporters andthe gender wage gap," LSE Research Online Documents on Economics 62604, London School of Economics and Political Science, LSE Library.
    5. Fabien Candau & Marc Fleurbaey, 2011. "Agglomeration and Welfare with Heterogeneous Preferences," Open Economies Review, Springer, vol. 22(4), pages 685-708, September.
    6. Fabien Candau & Elisa Dienesch, 2015. "Spatial distribution of skills and regional trade integration," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 54(2), pages 451-488, March.
    7. Unjung Whang, 2016. "Skilled-Labor Intensity Differences Across Firms, Endogenous Product Quality, and Wage Inequality," Open Economies Review, Springer, vol. 27(2), pages 251-292, April.
    8. Jože P. Damijan & Luca Marcolin, 2013. "Global firms and wages: is there a rent sharing channel?," Working Papers 164, European Bank for Reconstruction and Development, Office of the Chief Economist.
    9. Luca David Opromolla, 2013. "Trade and wage inequality," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    10. Unjung Whang, 2014. "Who Exports Better Quality Products to Smaller or More Distant Markets?," Review of International Economics, Wiley Blackwell, vol. 22(3), pages 578-598, August.

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    More about this item

    Keywords

    Exporters; Firm heterogeneity; Labor reallocation; Productivity measurement; Worker heterogeneity;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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