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Exports and Wages: Rent Sharing, Workforce Composition or Returns to Skills?

  • Macis, Mario

    ()

    (Johns Hopkins University)

  • Schivardi, Fabiano

    ()

    (Bocconi University)

We use linked employer-employee data from Italy to explore the relationship between exports and wages. Our empirical strategy exploits the 1992 devaluation of the Italian Lira, which represented a large and unforeseen shock to Italian firms' incentives to export. The results indicate that the export wage premium is due to exporting firms both (1) paying a wage premium above what their workers would earn in the outside labor market – the "rent-sharing" effect, and (2) employing workers whose skills command a higher price after the devaluation – the "skill composition" effect. The latter effect only emerges once we allow for the value of individual skills to differ in the pre- and post-devaluation periods. In fact, using a fixed measure of skills, as typically done in the literature, we would attribute the wage increase only to rent sharing. We also document that the export wage premium is larger for workers with more export-related experience. This indicates that the devaluation increased the demand for skills more useful for exporting, driving their relative price up.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6466.

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Length: 43 pages
Date of creation: Apr 2012
Date of revision:
Handle: RePEc:iza:izadps:dp6466
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  1. Kugler, Maurice & Verhoogen, Eric A, 2009. "The Quality-Complementarity Hypothesis: Theory and Evidence from Colombia," CEPR Discussion Papers 7119, C.E.P.R. Discussion Papers.
  2. Krishna, Pravin & Poole, Jennifer P. & Senses, Mine Zeynep, 2014. "Wage Effects of Trade Reform with Endogenous Worker Mobility," Journal of International Economics, Elsevier, vol. 93(2), pages 239-252.
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  15. 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.
  16. 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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