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...

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Main Authors: Krishna, Pravin, Poole, Jennifer P., Senses, Mine Zeynep
Format: Policy Research Working Paper
Language:English
Published: 2012
Subjects:
ERP
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
id okr-10986-3476
recordtype oai_dc
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
topic AGE CATEGORIES
AGE COMPOSITION
AVERAGE WAGE
AVERAGE WAGES
CAPITAL INFLOWS
CENTRAL BANK
CHANGES IN TRADE
COLLEGE-EDUCATED WORKERS
COMPARATIVE ADVANTAGE
COMPETITIVENESS
CURRENCY
CUSTOMS
CUSTOMS UNION
DEVELOPED COUNTRIES
DEVELOPMENT POLICY
DOMESTIC MARKET
ECONOMICS LITERATURE
EMPLOYEE
EMPLOYMENT
EMPLOYMENT COMPOSITION
EMPLOYMENT HISTORY
ERP
EXCHANGE RATES
EXPANSION
EXPORT PROMOTION
EXPORT PROMOTION POLICIES
EXPORT VALUE
EXPORTERS
EXPORTS
FINAL GOODS
FIRM LEVEL
FIRM PERFORMANCE
FIRM-LEVEL ANALYSES
FIRM-LEVEL ANALYSIS
FOREIGN COMPETITION
FOREIGN INVESTMENT
FREE TRADE
FREE TRADE AREA
GENERAL EQUILIBRIUM
GENERAL EQUILIBRIUM MODEL
GLOBALIZATION
HIGH WAGES
IMPACT OF TRADE
IMPACT OF TRADE LIBERALIZATION
IMPORT COMPETITION
IMPORT CONTROLS
IMPORT PROTECTION
IMPORT REGIMES
IMPORT SUBSTITUTION
IMPORT SUBSTITUTION ERA
IMPORT SUBSTITUTION INDUSTRIALIZATION
IMPORTS
INFORMAL SECTOR
INFORMAL TRAINING
INFORMAL WORKERS
INTERMEDIATE INPUTS
INTERNATIONAL ECONOMICS
INTERNATIONAL MARKETS
INTERNATIONAL PRICES
INTERNATIONAL STANDARD
INTERNATIONAL TRADE
JOB EXPERIENCE
JOBS
LABOR FORCE
LABOR MARKET
LABOR MARKET FUNCTIONS
LABOR MARKETS
MACROECONOMIC STABILIZATION
MANUFACTURERS
MANUFACTURING INDUSTRIES
MANUFACTURING LABOR FORCE
MARKET SHARE
MEASURE OF TRADE
MINIMUM WAGE
NON-TARIFF BARRIERS
OCCUPATION
OCCUPATIONS
OUTSOURCING
PAYING JOB
POLITICAL ECONOMY
PREVIOUS JOB
PRIMARY SCHOOL
PRIMARY SCHOOL EDUCATION
PRODUCTION PROCESS
PRODUCTIVE FIRMS
PROTECTION MEASURES
PROTECTION RATES
PROTECTIONIST
QUANTITATIVE RESTRICTIONS
RATES OF PROTECTION
REAL EXCHANGE RATE
REAL EXCHANGE RATES
REAL WAGE
REAL WAGES
SKILL UPGRADING
SKILLED OCCUPATIONS
SKILLED WORKERS
SMALL FIRMS
TARIFF BARRIERS
TARIFF RATES
TOTAL FACTOR PRODUCTIVITY
TRADE BARRIERS
TRADE LIBERALIZATION
TRADE OPENNESS
TRADE ORIENTATION
TRADE POLICY
TRADE POLICY REFORM
TRADE POLICY REFORMS
TRADE PRICES
TRADE PROTECTION
TRADE REFORM
TRADE REFORMS
VALUE ADDED
VALUE OF EXPORTS
WAGE DETERMINATION
WAGE EFFECT
WAGE GAP
WAGE IMPACT
WAGE INEQUALITY
WORKER
WORKERS
WORKFORCE SKILL
spellingShingle AGE CATEGORIES
AGE COMPOSITION
AVERAGE WAGE
AVERAGE WAGES
CAPITAL INFLOWS
CENTRAL BANK
CHANGES IN TRADE
COLLEGE-EDUCATED WORKERS
COMPARATIVE ADVANTAGE
COMPETITIVENESS
CURRENCY
CUSTOMS
CUSTOMS UNION
DEVELOPED COUNTRIES
DEVELOPMENT POLICY
DOMESTIC MARKET
ECONOMICS LITERATURE
EMPLOYEE
EMPLOYMENT
EMPLOYMENT COMPOSITION
EMPLOYMENT HISTORY
ERP
EXCHANGE RATES
EXPANSION
EXPORT PROMOTION
EXPORT PROMOTION POLICIES
EXPORT VALUE
EXPORTERS
EXPORTS
FINAL GOODS
FIRM LEVEL
FIRM PERFORMANCE
FIRM-LEVEL ANALYSES
FIRM-LEVEL ANALYSIS
FOREIGN COMPETITION
FOREIGN INVESTMENT
FREE TRADE
FREE TRADE AREA
GENERAL EQUILIBRIUM
GENERAL EQUILIBRIUM MODEL
GLOBALIZATION
HIGH WAGES
IMPACT OF TRADE
IMPACT OF TRADE LIBERALIZATION
IMPORT COMPETITION
IMPORT CONTROLS
IMPORT PROTECTION
IMPORT REGIMES
IMPORT SUBSTITUTION
IMPORT SUBSTITUTION ERA
IMPORT SUBSTITUTION INDUSTRIALIZATION
IMPORTS
INFORMAL SECTOR
INFORMAL TRAINING
INFORMAL WORKERS
INTERMEDIATE INPUTS
INTERNATIONAL ECONOMICS
INTERNATIONAL MARKETS
INTERNATIONAL PRICES
INTERNATIONAL STANDARD
INTERNATIONAL TRADE
JOB EXPERIENCE
JOBS
LABOR FORCE
LABOR MARKET
LABOR MARKET FUNCTIONS
LABOR MARKETS
MACROECONOMIC STABILIZATION
MANUFACTURERS
MANUFACTURING INDUSTRIES
MANUFACTURING LABOR FORCE
MARKET SHARE
MEASURE OF TRADE
MINIMUM WAGE
NON-TARIFF BARRIERS
OCCUPATION
OCCUPATIONS
OUTSOURCING
PAYING JOB
POLITICAL ECONOMY
PREVIOUS JOB
PRIMARY SCHOOL
PRIMARY SCHOOL EDUCATION
PRODUCTION PROCESS
PRODUCTIVE FIRMS
PROTECTION MEASURES
PROTECTION RATES
PROTECTIONIST
QUANTITATIVE RESTRICTIONS
RATES OF PROTECTION
REAL EXCHANGE RATE
REAL EXCHANGE RATES
REAL WAGE
REAL WAGES
SKILL UPGRADING
SKILLED OCCUPATIONS
SKILLED WORKERS
SMALL FIRMS
TARIFF BARRIERS
TARIFF RATES
TOTAL FACTOR PRODUCTIVITY
TRADE BARRIERS
TRADE LIBERALIZATION
TRADE OPENNESS
TRADE ORIENTATION
TRADE POLICY
TRADE POLICY REFORM
TRADE POLICY REFORMS
TRADE PRICES
TRADE PROTECTION
TRADE REFORM
TRADE REFORMS
VALUE ADDED
VALUE OF EXPORTS
WAGE DETERMINATION
WAGE EFFECT
WAGE GAP
WAGE IMPACT
WAGE INEQUALITY
WORKER
WORKERS
WORKFORCE SKILL
Krishna, Pravin
Poole, Jennifer P.
Senses, Mine Zeynep
Trade Liberalization, Firm Heterogneity, and Wages : New Evidence from Matched Employer-Employee Data
geographic_facet The World Region
The World Region
relation Policy Research working paper ; no. WPS 5711
description 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.
format Publications & Research :: Policy Research Working Paper
author Krishna, Pravin
Poole, Jennifer P.
Senses, Mine Zeynep
author_facet Krishna, Pravin
Poole, Jennifer P.
Senses, Mine Zeynep
author_sort Krishna, Pravin
title Trade Liberalization, Firm Heterogneity, and Wages : New Evidence from Matched Employer-Employee Data
title_short Trade Liberalization, Firm Heterogneity, and Wages : New Evidence from Matched Employer-Employee Data
title_full Trade Liberalization, Firm Heterogneity, and Wages : New Evidence from Matched Employer-Employee Data
title_fullStr Trade Liberalization, Firm Heterogneity, and Wages : New Evidence from Matched Employer-Employee Data
title_full_unstemmed Trade Liberalization, Firm Heterogneity, and Wages : New Evidence from Matched Employer-Employee Data
title_sort trade liberalization, firm heterogneity, and wages : new evidence from matched employer-employee data
publishDate 2012
url 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
_version_ 1764387061999075328
spelling okr-10986-34762021-04-23T14:02:10Z Trade Liberalization, Firm Heterogneity, and Wages : New Evidence from Matched Employer-Employee Data Krishna, Pravin Poole, Jennifer P. Senses, Mine Zeynep AGE CATEGORIES AGE COMPOSITION AVERAGE WAGE AVERAGE WAGES CAPITAL INFLOWS CENTRAL BANK CHANGES IN TRADE COLLEGE-EDUCATED WORKERS COMPARATIVE ADVANTAGE COMPETITIVENESS CURRENCY CUSTOMS CUSTOMS UNION DEVELOPED COUNTRIES DEVELOPMENT POLICY DOMESTIC MARKET ECONOMICS LITERATURE EMPLOYEE EMPLOYMENT EMPLOYMENT COMPOSITION EMPLOYMENT HISTORY ERP EXCHANGE RATES EXPANSION EXPORT PROMOTION EXPORT PROMOTION POLICIES EXPORT VALUE EXPORTERS EXPORTS FINAL GOODS FIRM LEVEL FIRM PERFORMANCE FIRM-LEVEL ANALYSES FIRM-LEVEL ANALYSIS FOREIGN COMPETITION FOREIGN INVESTMENT FREE TRADE FREE TRADE AREA GENERAL EQUILIBRIUM GENERAL EQUILIBRIUM MODEL GLOBALIZATION HIGH WAGES IMPACT OF TRADE IMPACT OF TRADE LIBERALIZATION IMPORT COMPETITION IMPORT CONTROLS IMPORT PROTECTION IMPORT REGIMES IMPORT SUBSTITUTION IMPORT SUBSTITUTION ERA IMPORT SUBSTITUTION INDUSTRIALIZATION IMPORTS INFORMAL SECTOR INFORMAL TRAINING INFORMAL WORKERS INTERMEDIATE INPUTS INTERNATIONAL ECONOMICS INTERNATIONAL MARKETS INTERNATIONAL PRICES INTERNATIONAL STANDARD INTERNATIONAL TRADE JOB EXPERIENCE JOBS LABOR FORCE LABOR MARKET LABOR MARKET FUNCTIONS LABOR MARKETS MACROECONOMIC STABILIZATION MANUFACTURERS MANUFACTURING INDUSTRIES MANUFACTURING LABOR FORCE MARKET SHARE MEASURE OF TRADE MINIMUM WAGE NON-TARIFF BARRIERS OCCUPATION OCCUPATIONS OUTSOURCING PAYING JOB POLITICAL ECONOMY PREVIOUS JOB PRIMARY SCHOOL PRIMARY SCHOOL EDUCATION PRODUCTION PROCESS PRODUCTIVE FIRMS PROTECTION MEASURES PROTECTION RATES PROTECTIONIST QUANTITATIVE RESTRICTIONS RATES OF PROTECTION REAL EXCHANGE RATE REAL EXCHANGE RATES REAL WAGE REAL WAGES SKILL UPGRADING SKILLED OCCUPATIONS SKILLED WORKERS SMALL FIRMS TARIFF BARRIERS TARIFF RATES TOTAL FACTOR PRODUCTIVITY TRADE BARRIERS TRADE LIBERALIZATION TRADE OPENNESS TRADE ORIENTATION TRADE POLICY TRADE POLICY REFORM TRADE POLICY REFORMS TRADE PRICES TRADE PROTECTION TRADE REFORM TRADE REFORMS VALUE ADDED VALUE OF EXPORTS WAGE DETERMINATION WAGE EFFECT WAGE GAP WAGE IMPACT WAGE INEQUALITY WORKER WORKERS WORKFORCE SKILL 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. 2012-03-19T18:03:08Z 2012-03-19T18:03:08Z 2011-06-01 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 English Policy Research working paper ; no. WPS 5711 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Publications & Research :: Policy Research Working Paper The World Region The World Region