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Selection into Trade and Wage Inequality †

Selection into Trade and Wage Inequality † Abstract This paper analyzes how intra-industry trade affects the wage distribution when both workers and firms are heterogeneous. Positive assortative matching between worker skill and firm technology generates an employer size-wage premium and an exporter wage premium. Fixed export costs cause the selection of advanced technology, high-skill firms into exporting, and trade shifts the firm technology distribution upwards. Consequently, trade increases skill demand and wage inequality in all countries, both on aggregate and within the upper tail of the wage distribution. This holds when firms receive random technology draws and when technology depends on firm-level R&D. (JEL F16, J23, J24, J31 ) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal: Microeconomics American Economic Association

Selection into Trade and Wage Inequality †

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References (64)

Publisher
American Economic Association
Copyright
Copyright © 2014 by the American Economic Association
Subject
Articles
ISSN
1945-7685
eISSN
1945-7685
DOI
10.1257/mic.6.3.157
Publisher site
See Article on Publisher Site

Abstract

Abstract This paper analyzes how intra-industry trade affects the wage distribution when both workers and firms are heterogeneous. Positive assortative matching between worker skill and firm technology generates an employer size-wage premium and an exporter wage premium. Fixed export costs cause the selection of advanced technology, high-skill firms into exporting, and trade shifts the firm technology distribution upwards. Consequently, trade increases skill demand and wage inequality in all countries, both on aggregate and within the upper tail of the wage distribution. This holds when firms receive random technology draws and when technology depends on firm-level R&D. (JEL F16, J23, J24, J31 )

Journal

American Economic Journal: MicroeconomicsAmerican Economic Association

Published: Aug 1, 2014

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