The exporter wage premium when firms and workers are heterogeneous

Egger H, Egger P, Kreickemeier U, Moser C (2020)

Publication Type: Journal article

Publication year: 2020

Journal

European Economic Review Elsevier

Book Volume: 130

Article Number: 103599

DOI: 10.1016/j.euroecorev.2020.103599

Abstract

In this paper, we develop a new model of international trade, in which workers featuring higher innate abilities match with firms featuring higher innate productivities. This model allows us to quantify the effect of trade on labour income inequality when workers have heterogeneous abilities within the broad groups of skilled and unskilled workers. Self-selection of the most productive firms into exporting generates an exporter wage premium, and our framework with skilled and unskilled workers allows us to decompose this premium into its skill-specific components. We employ linked employer-employee data from Germany to structurally estimate the parameters of the model. These parameter estimates imply an average exporter wage premium of 6 percent, with exporting firms paying no wage premium at all to their unskilled workers, while the premium for skilled workers is 15 percent. Measured by the Theil index, moving the economy to autarky would reduce wage inequality within the group of skilled workers by 29 percent, and it would reduce overall labour income inequality by 8 percent.

Authors with CRIS profile

Christoph Moser Lehrstuhl für Global Governance and International Trade

Involved external institutions

Georg-August-Universität Göttingen DE Germany (DE) Eidgenössische Technische Hochschule Zürich (ETHZ) / Swiss Federal Institute of Technology in Zurich CH Switzerland (CH) Universität Bayreuth DE Germany (DE)

How to cite

APA:

Egger, H., Egger, P., Kreickemeier, U., & Moser, C. (2020). The exporter wage premium when firms and workers are heterogeneous. European Economic Review, 130. https://dx.doi.org/10.1016/j.euroecorev.2020.103599

MLA:

Egger, Hartmut, et al. "The exporter wage premium when firms and workers are heterogeneous." European Economic Review 130 (2020).

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