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Firms' Main Market, Human Capital and Wages

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  • Alcala, Francisco
  • Hernandez, Pedro J.

Abstract

Recent international trade literature emphasizes two features in characterizing the current patterns of trade: efficiency heterogeneity at the firm level and quality differentiation. This paper explores human capital and wage differences across firms in that context. We build a partial equilibrium model predicting that firms selling in more-remote markets employ higher human capital and pay higher wages to employees within each education group. The channel linking these variables is firms’ endogenous choice of quality. Predictions are tested using Spanish employer-employee matched data that classify firms according to four main destination markets: local, national, European Union, and rest of the World. Employees’ average education is increasing in the remoteness of firm’s main output market. Market–destination wage premia are large, increasing in the remoteness of the market, and increasing in individual education. These results suggest that increasing globalization may play a significant role in raising wage inequality within and across education groups.

Suggested Citation

  • Alcala, Francisco & Hernandez, Pedro J., 2009. "Firms' Main Market, Human Capital and Wages," MPRA Paper 19403, University Library of Munich, Germany, revised 2009.
  • Handle: RePEc:pra:mprapa:19403
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    References listed on IDEAS

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    Cited by:

    1. Alcalá, Francisco, 2016. "Specialization across goods and export quality," Journal of International Economics, Elsevier, vol. 98(C), pages 216-232.
    2. Hernández, Pedro Jesús, 2012. "Is there a Producer Quality Wage Premium similar to the Exporter Wage Premium," UMUFAE Economics Working Papers 28517, DIGITUM. Universidad de Murcia.
    3. Joachim Wagner, 2012. "International trade and firm performance: a survey of empirical studies since 2006," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 148(2), pages 235-267, June.
    4. Mozas-Moral, Adoración & Moral-Pajares, Encarnación & Medina-Viruel, Miguel Jesús & Bernal-Jurado, Enrique, 2016. "Manager's educational background and ICT use as antecedents of export decisions: A crisp set QCA analysis," Journal of Business Research, Elsevier, vol. 69(4), pages 1333-1335.

    More about this item

    Keywords

    vertical differentiation; exporters; Alchian-Allen effect; wage inequality; unobservable skills;

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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