Export Activity,Firm Size and Wage Structure: Evidence from Taiwanese Manufacturing Firms*

This study adopts a semiparametric smooth coefficient model to evaluate the export–wage premiums, firm size–wage premiums, and the wage gap between skilled and unskilled labor. Particular focus is placed upon widespread evidence indicating that pay levels in ‘large’ and ‘export‐oriented’ firms are higher than in their ‘small’ and ‘domestic‐oriented’ counterparts. Applying the firm‐level data for Taiwanese manufacturing firms, we find a positive export–wage premium for skilled workers and a negative export–wage premium for unskilled workers. The hypothesis of a constant export premium across firm size is rejected. While most of the export–wage premiums for skilled labor can be attributed to the small and medium firms, the large exporting firms have a significant adverse effect on wages for unskilled labor. Moreover, our results suggest that the firm size–wage premiums for skilled workers are larger than those for unskilled workers. The wage gap between the two skill groups is also sensitive to size categories.     

Do Exporting Firms Pay Higher Wages? Evidence from Kenya's Manufacturing Sector

Abstract: When trade liberalization was first embarked on in Kenya some 20 years ago, a key argument against it was that it would reduce domestic wages, as exporting firms sought to remain competitive versus, for example, the low‐cost Asian countries. A counter argument was that manufactured exports require more elaborate design, supervision, packaging and handling, and thus a more educated labor force than production for the domestic market. To attract such skills, exporting firms would need to pay higher wages than non‐exporting ones. This paper uses data from Kenyan manufacturing to study the impact of trade liberalization on earnings, distinguishing between exporting and non‐exporting firms. In particular, it investigates whether exporting firms paid a wage‐premium to their employees. The study uses manufacturing firm survey data from a World Bank regional project. The study has three important findings: (1) There was a large and significant effect of exporting on wages in the first decade of trade liberalization. During the first half of the 1990s, workers in exporting firms earned up to 30 percent more than those engaged in non‐exporting firms. The results are robust even after controlling for individual and firm‐level characteristics such as employee demographics, productivity, firm location and occupation. (2) After a decade of trade liberalization, exporting ceased to be a significant determinant of wages in Kenyan manufacturing, after controlling for productivity and firm location. (3) During the 2000s, casual or irregular employment became a more common feature of exporting firms. The results suggest that while higher wages were important in attracting skilled labor to exporting firms at the beginning of trade liberalization in the 1990s, domestic competition has since reduced the wage premium. Cost cutting pressures are instead reflected in the substitution of casual and low wage labor for permanent and better educated labor and in increased automation.     

Trade liberalization and the wage gap: the role of vertical linkages and fixed costs

This paper studies the labor market impacts of trade liberalization, and specifically tariff reductions, with a focus on the wage gap between skilled and unskilled workers in presence of vertical linkages in the fixed costs of production. To that purpose, we develop and empirically test a monopolistic competition model with variable elasticity of substitution and labor differentiated by skill level, where skilled workers are the residual claimants of savings on imported inputs. Consistently with the model predictions, we find that a 10% reduction in tariffs implies on average a 3.8% increase in the wage gap. In addition, the same level of tariff reduction is expected to lower unskilled employment in domestic production by 3.3%, which is partially offset by an expansion of unskilled employment in the export segment of production. These results are obtained matching detailed international trade data with World Input–Output Tables and EU KLEMS data on country-sector wage by skill level on 17 OECD countries from 1996 to 2005.     

Wage increases, wage convergence, and the Lewis turning point in China

We examine the wage trends of ordinary workers and the wage convergence between unskilled and skilled workers in China. First, we find that wages in all non-agricultural sectors, wages of migrant workers, and wages of hired workers in the agricultural sector have increased dramatically since 2003. Second, through comparing wage differentials between migrant and urban resident workers and between heterogeneous education groups within migrant workers, and by investigating the changes in the contribution of the returns to education to wage differentials, we find that the wages of unskilled and skilled workers have converged. Both the increasing wage trends and wage convergence are interpreted as evidence supporting the hypothesis that China has passed what can be called the Lewis turning point in the industrial sector. We conclude that the sustainability of economic growth in China requires an upgrading of labor market institutions to accommodate the merging of the rural and urban labor forces.     

Skilled-Labor Intensity Differences Across Firms,Endogenous Product Quality,and Wage Inequality

This paper proposes a theory to explain the relative wage-rate increase for skilled labor that results from trade liberalization that relies on within-sector reallocations of production resources (skilled and unskilled labor) across firms. Motivated by some stylized facts, in a model with firm heterogeneity, including firms that differ in their skill intensity even within a narrowly defined industry, firms with relatively high skill intensity that are more likely to be exporters, and a positive association between a firm’s skill intensity and its product quality, I develop a general equilibrium model where firms with a higher skill intensity endogenously choose a higher-quality product, and tend to be more profitable. In this framework, a reduction in trade costs allows members of the workforce to reallocate to more efficient firms that produce higher-quality products, using their skilled labor more intensively, resulting in a rising skill premium. The main sources of the increasing wage inequality that followed trade openness are a positive link between a firm’s skill intensity, its product quality, and quality competition.     

Who is Better Off from Trade Liberalization? An Experience from Urban China*

Empirical studies have found that the skill wage gap (difference between wages earned by skilled and unskilled workers) narrowed in the case of the ‘Four Asian Dragons’ as they underwent trade liberalization during the 1960s and 1970s, whereas the gap widened in most of the Latin American countries after they liberalized their economies in the 1980s. China's integration into the world economy since 1978 has been used to explain this phenomenon, but few formal studies have been carried out in China regarding the effects of trade liberalization on the skill wage gap because of the limited availability of data. The present study uses unique household surveys conducted in ten provinces of China in 1988 and 1995 to study this issue. Results show that trade liberalization that occurred in China between 1988 and 1995 was responsible for an average increase of 28.73 yuan (approximately 20 percent of the total increase) in average monthly wages. However, trade liberalization significantly widened the urban skill wage gap in China by introducing an increase in income only for those who had 13 years or more of education (at least junior high school graduates). Interestingly, import liberalization also only benefited those who had more than 9 years of schooling; whereas export liberalization brought wage increases for people with 7–12 years of education. Finally, those with specific production skills from technical schools, rather than those with several years of general education, were mostly favored in the labor market in China between 1988 and 1995.     

Appropriation,firm dynamics,and wage inequality

This paper examines the income distribution and welfare effects of appropriation activities in an economy. In the short run, with a given number of firms, appropriation can narrow wage inequality between skilled and unskilled labor when the capital resources accrued by appropriators are not large. However, wage inequality widens when the capital accrued is large. In the long run, with free entry and exit of firms, an increase in appropriation can cause firms to enter when the accrued capital is not large. This gives rise to a win–win outcome by raising the wages of skilled and unskilled labor. However, if accrued capital is large, firms exit and a lose–lose situation may occur in which skilled and unskilled wages are reduced.     

Economic geography and inequality in China: Did improved market access widen spatial wage differences?

New economic geography (NEG) models predict that costly transport and the spatial distribution of demand affect the profits firms can earn in different locations, leading to higher wages for workers employed in cities with better geographic access to markets. In light of the ongoing economic integration and market reforms that occurred in China after 1995, we use three waves of Chinese Household Income Project (CHIP) data to measure the extent to which the influence of market access on wages changed and affected wage dispersion across Chinese cities over the next 12 years. Employing the gravity-based method of Redding and Venables (2004) to calculate the market access available to firms located in each city, we test whether the elasticity of the wage with respect to local market access increased over time. We find that in all three years market access of the worker's location has a positive and significant influence on the wage. Consistent with extensive labor market reforms of the late 1990s, the estimated wage elasticity doubles between 1995 and 2002 and is stable thereafter. Our estimates indicate that wages of all workers become more responsive to market forces in a manner consistent with NEG predictions, both skilled and unskilled and those working for state as well as private enterprises. We also provide evidence that these results are not driven by omission of other forms of agglomeration or by selection bias. Estimated spatial differences in nominal wages are large: a worker moving from an inland location to the coast in 2007 would have doubled his or her nominal wage. Counterfactual analysis indicates that spatial differences in market access contribute to wage inequality, but less so over time.     

Efficiency Wages,Interfirm Comparison,and Unemployment

The paper presents an efficiency wage model where worker effort depends on own wages relative both to wages of other workers in the firm and to similar workers in other firms. First, we show how the Solow conditions are modified if internal comparison effects are at work. Second, we discuss the effect of internal wage comparison on wage inequality within firms. Third, we study unemployment and relative wage determination within a general equilibrium model, and analyze the effect of technological change and various tax policies on equilibrium unemployment and relative wages. Finally, the short-run effects of aggregate demand shocks are analyzed.     

Trade,technology, and the labour market: impacts on wage inequality within countries

This paper focuses on the widening wage inequality between skilled and unskilled workers within countries and discusses whether trade and technology have contributed to this trend. The paper develops an analytical framework for wage inequality that traces the determinants and their relative roles in wage inequality in different stages of the development of trade theory, especially those considering new evidence after 2011. We find that technology plays a key role in the rise of wage inequality in most countries, while trade plays an increasingly crucial and more complex role in recent years. Skill supply institutions, such as education systems supplying skilled labour or unions participating in wage‐setting processes, suppress the rise of wage inequality in some countries. The paper further outlines the mechanisms through which trade affects wage inequality, including offshoring, firm heterogeneity, labour market frictions and global value chains. We find that trade has indirect effects on technology, which further enlarges the wage inequality among skills. The paper also discusses the policy implications of the impacts of trade and technology on wage inequality.     

A Picture of Wage Inequality and the Allocation of Labor Through a Period of Trade Liberalization: The Case of Brazil

This paper constructs a picture of the labor market impact of trade liberalization in Brazil. We examine the level and dispersion of wages, the skilled wage premium, and employment composition before and after trade liberalization. After trade reform, there was a rise in the returns to college education which, since the share of college workers also rose, is attributable to rising demand. This change did not increase overall wage dispersion because of the small share of college-educated workers and because of decreasing returns to intermediate levels of education.     

How does economic integration influence employment and wages in border regions? The case of the EU enlargement 2004 and Germany’s eastern border

This paper considers the (short-run) employment and wage effects of the 2004 EU enlargement on firms located close to Germany’s eastern border. We use a 50% sample of Germans plants and apply difference-in-differences estimators combined with a matching approach. We evaluate changes in total employment, the employment shares of low-skilled and East European workers and the wages for low-skilled, skilled and high-skilled workers in various sectors. Our results suggest basically no short-run employment effects of the EU enlargement except for firms active in wholesale and retail trade, hotels and restaurants. We also find some evidence for a stronger employment of East European workers in almost all border firms, although the effects are quantitatively small. Negative wage effects are only found for skilled workers in consulting, research and related activities.     

TRADE LIBERALIZATION AND WAGE PREMIUM IN ARGENTINA: THE ROLE OF TRADE FACTOR INTENSITY

During the 1990s, several Latin American countries implemented policies directed to the removal of barriers on international trade. However, there is a perception that reforms, especially trade liberalization, failed to deliver on their promises, easing the way for policies aimed at reversing some of them. Following Wood's hypothesis, we allow for the effects of liberalization to vary, depending on the skill intensity of production. The evidence confirms that the role of trade liberalization has been relatively small, but controlling for the presence of endogeneity gives larger estimates. Contrary to previous evidence, the wage premium of skilled workers was more sensitive to the increase of skill‐intensive exports than to that of unskilled‐intensive imports.     

Upstreamness,exports, and wage inequality: Evidence from Chinese manufacturing data

In this paper we investigate within-firm wage inequality across heterogeneous industries that hold different positions in the domestic value chain, and across heterogeneous firms that have different exposure to trade. We find that the wage inequality problem is more severe in upstream industries than in downstream ones, and among firms with greater exposure to trade (i.e., larger export share of sales). Our findings support both classic and new new trade theories on wage inequality. In downstream industries where Chinese firms are typically engaged in processing and assembly work with intensive use of unskilled labor, trade leads to less wage inequality within firms. However, trade also introduces pro-competitive effects which usually benefit exporters and their skilled labor. The results hold after various checks and controls for robustness.     

Globalization and wage inequalities: A synthesis of three theories

Globalization and Wage Inequalities: A Synthesis of Three Theories. — The theoretical insights of Heckscher and Ohlin, Feenstra and Hanson, and Tang and Wood provide a plausible explanation of the effects of globalization on wage inequalities in developed and developing countries. In combination, these three theories can explain, among other things, why inequality has fallen in some developing countries but risen in others. Improved travel and communications facilities raise the relative wages of highly skilled Northern workers, but in both the North and the South have mixed effects on wage gaps between medium-skilled and unskilled workers, sometimes reinforcing and sometimes offsetting the effects of falling barriers to trade.     

Institutions, wages, and inequality: The case of Europe and its periphery (1500–1899)

This paper explores the long-run relationship between institutions and wage outcomes in Europe and its periphery. I find that cities that exercised stronger institutional protection of private property experienced: (i) higher levels of both skilled and unskilled real wages, as well as (ii) lower levels of inequality as measured by the skilled–unskilled wage ratio. While the first result corroborates existing work on the positive growth effects of better institutions, the second finding is more novel to the literature. Some explanations are proposed for how stronger institutions can cause an increase in the relative supply of skilled workers, thus lowering wage inequality.     

The new Ricardian specific factor model

This paper explores the implications on trade and wage inequality of introducing financial capital or credit in the standard Ricardian model of production, where a given amount of start-up credit is used to employ sector specific skilled and unskilled workers following the Wage Fund approach of classical economists. Thus, we have the Specific Factor (SF) structure of Jones (1971) in a new Ricardian model (NRM) with credit and two types of labour. With an entirely different mechanism from the conventional Neo-Classical structure, distributional consequences of changes in endowments, commodity prices, and financial capital are established. Comparisons with Jones (1971) show that unlike SF model, credit expansion affects wages and nominal costs without affecting trade patterns, while rise in the relative price of the skill-intensive good causes skilled wage to hike less than proportionately, and may cause return to capital to inflate more than the wages. We extend the basic model to analyse immigration, unemployment and imperfect credit market.     

Black male unemployment

Public policies intended to raise the wages of unskilled workers, equalize educational opportunity, stabilize employment, and increase imports were sources of the growth of unskilled and, therefore, of black unemployment since 1950. The wartime wage-equalization policy and postwar minimum-wage policies raised the cost of unskilled labor relative to that of capital and of skilled labor. The Fed's inflationary full-employment policy between 1950 and 1970 reduced real interest rates relative to unskilled wages. Subsidies for higher education increased the supply of skilled labor, reducing its cost relative to that of unskilled labor. Trade liberalization increased imports of manufactured goods from developing countries, which displaced U.S. unskilled labor.     

Work and Wages at a Melbourne Factory,the Guest Biscuit Works 1870–1921

The story of wages in nineteenth‐ and early twentieth‐century Australia has largely been told through official published statistics and the experiences of skilled artisans and construction labourers. Utilising wage book data from an early successful manufacturing plant – a biscuit factory – we reveal the earning histories of several neglected groups of Australian workers. We specifically investigate the effects of the 1890s depression, the introduction of a wages board, and shifting demographics on the wages of unskilled factory hands, women, juvenile workers, and commercial clerks. We demonstrate that typical Australian wage series studies have misinterpreted the impact of these phenomena.     

外包与工资差距——基于工业行业数据的经验研究

本文首先检验了国际外包对我国熟练劳动力与非熟练劳动力工资差距的影响.计量结果表明,与斯托尔帕-萨缪尔逊定理所揭示的相反,外包贸易降低了我国相对丰裕的非熟练劳动力的相对工资.微电子设备的使用也加大了对熟练劳动力的需求,进一步加大熟练劳动力与非熟练劳动力的工资差距.为了检查是否是因为贸易形态的变化所导致的结果,我们进一步检...