Trade Liberalization, Firm Heterogneity, and Wages : New Evidence from Matched Employer-Employee Data
In this paper, the authors use a linked employer-employee database from Brazil to examine the impact of trade reform on the wages of workers employed at heterogeneous firms. The analysis of the data at the firm-level confirms earlier findings of a...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
2012
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| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110629090656 http://hdl.handle.net/10986/3476 |
| Summary: | In this paper, the authors use a linked
employer-employee database from Brazil to examine the impact
of trade reform on the wages of workers employed at
heterogeneous firms. The analysis of the data at the
firm-level confirms earlier findings of a differential
positive effect of trade liberalization on the average wages
at exporting firms relative to non-exporting firms. However,
this analysis of average firm-level wages is incomplete
along several dimensions. First, it cannot fully account for
the impact of a change in trade barriers on workforce
composition especially in terms of unobservable
(time-invariant) characteristics of workers (innate ability)
and any additional productivity that obtains in the context
of employment in the specific firm (match specific ability).
Furthermore, the firm-level analysis is undertaken under the
assumption that the assignment of workers to firms is
random. This ignores the sorting of worker into firms and
leads to a bias in estimates of the differential impact of
trade on workers at exporting firms relative to
non-exporting firms. Using detailed information on worker
and firm characteristics to control for compositional
effects and using firm-worker match specific effects to
account for the endogenous mobility of workers, the authors
find the differential effect of trade openness on wages in
exporting firms relative to domestic firms to be
insignificant. Consistent with the models of Helpman,
Itskhoki, and Redding (2010) and Davidson, Matusz and
Schevchenko (2008), they also find that the workforce
composition improves systematically in exporting firms in
terms of innate (time invariant) worker ability and in terms
the quality of the worker-firm matches. |
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