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Wages and International Trade

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  • Francis Kramarz

    (Crest)

Abstract

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.

Suggested Citation

  • Francis Kramarz, 2003. "Wages and International Trade," Working Papers 2003-27, Center for Research in Economics and Statistics.
  • Handle: RePEc:crs:wpaper:2003-27
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    References listed on IDEAS

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    1. 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.
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    13. Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics.
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    Citations

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    Cited by:

    1. Pedro Martins, 2009. "Rent sharing before and after the wage bill," Applied Economics, Taylor & Francis Journals, vol. 41(17), pages 2133-2151.
    2. Hervé Boulhol, 2008. "The Convergence of Price–cost Margins," Open Economies Review, Springer, vol. 19(2), pages 221-240, April.
    3. Pedro Martins & Jim Jin, 2010. "Firm-level social returns to education," Journal of Population Economics, Springer;European Society for Population Economics, vol. 23(2), pages 539-558, March.
    4. Boulhol, Herv, 2009. "Do capital market and trade liberalization trigger labor market deregulation?," Journal of International Economics, Elsevier, vol. 77(2), pages 223-233, April.
    5. Andersen, Torben M & Sorensen, Allan, 2005. "Product Market Integration, Wages and Inequality," CEPR Discussion Papers 4963, C.E.P.R. Discussion Papers.
    6. Martins, Pedro S. & Esteves, Luiz A., 2006. "Is There Rent Sharing in Developing Countries? Matched-Panel Evidence from Brazil," IZA Discussion Papers 2317, Institute for the Study of Labor (IZA).
    7. Filip Abraham & Jozef Konings & Stijn Vanormelingen, 2009. "The effect of globalization on union bargaining and price-cost margins of firms," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 145(1), pages 13-36, April.
    8. Alessandra Tucci, 2005. "Trade, Foreign Networks and Performance: a Firm-Level Analysis for India," Development Working Papers 199, Centro Studi Luca d'Agliano, University of Milano.
    9. Ellen Brock & Sabien Dobbelaere, 2006. "Has International Trade Affected Workers’ Bargaining Power?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 142(2), pages 233-266, July.
    10. Hervé Boulhol & Sabien Dobbelaere & Sara Maioli, 2011. "Imports as Product and Labour Market Discipline," British Journal of Industrial Relations, London School of Economics, vol. 49(2), pages 331-361, June.
    11. repec:hal:journl:halshs-00193915 is not listed on IDEAS
    12. Dumont, Michel & Rayp, Glenn & Willemé, Peter, 2012. "The bargaining position of low-skilled and high-skilled workers in a globalising world," Labour Economics, Elsevier, vol. 19(3), pages 312-319.
    13. Nicole Guertzgen, 2009. "Rent-sharing and Collective Bargaining Coverage: Evidence from Linked Employer-Employee Data," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(2), pages 323-349, June.
    14. Hervé Boulhol, 2005. "Why haven't price-cost margins decreased with globalization ?," Cahiers de la Maison des Sciences Economiques bla06007, Université Panthéon-Sorbonne (Paris 1).
    15. Torben M. Andersen & Allan Sørensen, 2008. "Product Market Integration and Heterogeneity-Rent Sharing and Pricing to Market," Review of International Economics, Wiley Blackwell, vol. 16(2), pages 268-284, May.

    More about this item

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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