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Wages and International Trade

  • Francis Kramarz

    (Crest)

In this paper, I present direct micro-econometric evidence of the relationbetween individual wages of French workers and the import behavior of their employingfirms. First, a model shows that the impact of firms’ imports on workers’ wages notonly comes from movements in the quasi-rent induced by competitive pressures but alsofrom alterations of workers and firms threat points in the bargaining process induced bytrade. To estimate this model, I use a unique matched employer-employee data sourcethat contains information on firms inputs, including imports by type of product andby country of origin, as well as individual characteristics of a representative sample ofworkers employed at those firms. Because the quasi-rent - a firm-level variable - and seniority- a person-level variable directly affected by import competition are endogenousin the wage equation, I use export prices of US firms to various destinations as instruments.To summarize my results, I find a bargaining power below 0.20. I also showthat workers’ wages deteriorate through competitive pressures. Two effects are at play.In industries where firms actively import finished goods, workers’ wage is decreased.But, firm’s own imports of the same goods “protect” its workers through a hold-upeffect. The total effect is negative for most workers. Highly educated workers appear tobenefit from trade, in stark contrast with less educated workers. Also, very experiencedworkers, when still employed in manufacturing firms, appear to benefit from the hold-upeffect but to be most affected by the firm’s competitors imports.

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Paper provided by Centre de Recherche en Economie et Statistique in its series Working Papers with number 2003-27.

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Date of creation: 2003
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Handle: RePEc:crs:wpaper:2003-27
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  1. Van Reenen, John, 1994. "The Creation and Capture of Rents: Wages and Innovation in a Panel of UK Companies," CEPR Discussion Papers 1071, C.E.P.R. Discussion Papers.
  2. Marianne Bertrand, 1999. "From the Invisible Handshake to the Invisible Hand? How Import Competition Changes the Employment Relationship," NBER Working Papers 6900, National Bureau of Economic Research, Inc.
  3. Revenga, Ana L, 1992. "Exporting Jobs? The Impact of Import Competition on Employment and Wages in U.S. Manufacturing," The Quarterly Journal of Economics, MIT Press, vol. 107(1), pages 255-84, February.
  4. John M. ABOWD & Laurence ALLAIN, 1996. "Compensation Structure and Product Market Competition," Annales d'Economie et de Statistique, ENSAE, issue 41-42, pages 207-217.
  5. David G. Blanchflower & Andrew J. Oswald & Peter Sanfey, 1992. "Wages, Profits and Rent-Sharing," NBER Working Papers 4222, National Bureau of Economic Research, Inc.
  6. Bernard, Andrew B. & Jensen, J. Bradford, 1997. "Exporters, skill upgrading, and the wage gap," Journal of International Economics, Elsevier, vol. 42(1-2), pages 3-31, February.
  7. Farber, Henry S., 1999. "Mobility and stability: The dynamics of job change in labor markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 37, pages 2439-2483 Elsevier.
  8. Richard B. Freeman, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer.
  9. John M. Abowd & Thomas Lemieux, 1991. "The Effects of Product Market Competition on Collective Bargaining Agreements: The Case of Foreign Competition in Canada," NBER Working Papers 3808, National Bureau of Economic Research, Inc.
  10. Johnson, George & Stafford, Frank, 1999. "The labor market implications of international trade," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 34, pages 2215-2288 Elsevier.
  11. John M. Abowd & Francis Kramarz & David N. Margolis, 1994. "High-Wage Workers and High-Wage Firms," CIRANO Working Papers 94s-23, CIRANO.
  12. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June.
  13. Robert Z. Lawrence, 1994. "Trade, Multinationals, & Labor," NBER Working Papers 4836, National Bureau of Economic Research, Inc.
  14. Orley Ashenfelter & James N. Brown, 1985. "Testing the Efficiency of Employment Contracts," Working Papers 573, Princeton University, Department of Economics, Industrial Relations Section..
  15. Edward E. Leamer, 1994. "Trade, Wages and Revolving Door Ideas," NBER Working Papers 4716, National Bureau of Economic Research, Inc.
  16. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
  17. John M. Abowd & Francis Kramarz, 1992. "A Test of Negotiation and Incentive Compensation Models Using Longitudinal French Enterprise Data," NBER Working Papers 4044, National Bureau of Economic Research, Inc.
  18. Edward E. Leamer, 1996. "In Search of Stolper-Samuelson Effects on U.S. Wages," NBER Working Papers 5427, National Bureau of Economic Research, Inc.
  19. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
  20. Linda Goldberg & Joseph Tracy, 2001. "Exchange Rates and Wages," NBER Working Papers 8137, National Bureau of Economic Research, Inc.
  21. Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics.
  22. Paul Krugman, 1995. "Growing World Trade: Causes and Consequences," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 327-377.
  23. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
  24. John M. Abowd & Robert H. Creecy & Francis Kramarz, 2002. "Computing Person and Firm Effects Using Linked Longitudinal Employer-Employee Data," Longitudinal Employer-Household Dynamics Technical Papers 2002-06, Center for Economic Studies, U.S. Census Bureau.
  25. Monique Meron, 1988. "Les migrations des salariés de l'état : plus loin de Paris, plus près du soleil," Économie et Statistique, Programme National Persée, vol. 214(1), pages 3-18.
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