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Selection into trade and wage inequality

Sampson, Thomas (2014) Selection into trade and wage inequality. American Economic Journal: Microeconomics, 6 (3). pp. 157-202. ISSN 1945-7669

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Identification Number: 10.1257/mic.6.3.157

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 firmlevel R&D.

Item Type: Article
Official URL: https://www.aeaweb.org/journals/mic
Additional Information: © 2014 American Economic Association
Divisions: Economics
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HF Commerce
JEL classification: F - International Economics > F1 - Trade > F16 - Trade and Labor Market Interactions
J - Labor and Demographic Economics > J2 - Time Allocation, Work Behavior, and Employment Determination and Creation; Human Capital; Retirement > J23 - Employment Determination; Job Creation; Demand for Labor; Self-Employment
J - Labor and Demographic Economics > J2 - Time Allocation, Work Behavior, and Employment Determination and Creation; Human Capital; Retirement > J24 - Human Capital; Skills; Occupational Choice; Labor Productivity
J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure; Wage Differentials by Skill, Training, Occupation, etc.
Sets: Departments > Economics
Collections > Economists Online
Date Deposited: 05 Sep 2014 09:03
Last Modified: 20 Jun 2020 01:54
URI: http://eprints.lse.ac.uk/id/eprint/59287

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