Trade liberalization, firm heterogeneity, and wages : new evidence from matched employer-employee data, Vol. 1 of 1

About

Countries

Data & Research

Learning

News

Projects & Operations

Publications

Topics

Home > Data & Research > Research > Document Search > Report Details

Trade liberalization, firm heterogeneity, and wages : new evidence from matched employer-employee data

Author:	Krishna, Pravin; Poole, Jennifer P.; Senses, Mine Zeynep;	Collection Title:	Policy Research working paper ; no. WPS 5711
Country:	World;	Date Stored:	2011/06/29
Document Date:	2011/06/01	Document Type:	Policy Research Working Paper
Language:	English	Region:	The World Region
Report Number:	WPS5711	SubTopics:	Economic Theory & Research; Free Trade; Trade Policy; Microfinance; Labor Markets
Volume No:	1 of 1

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.


Official Documents Official, scanned versions of documents (may include signatures, etc.)
File Type		Description	File Size (mb)

	PDF 49 pages	Official version*	3.43 (approx.)
	Text	Text version**

* The official version is derived from scanning the final, paper copy of the document and is the official,
archived version including all signatures, charts, etc.

** The text version is the OCR text of the final scanned version and is not an accurate representation of the final text.
It is provided solely to benefit users with slow connectivity.

Permanent URL for this page: http://go.worldbank.org/VT493F0R80