Wage Structure Effects of International Trade: Evidence from a Small Open Economy

Abstract

In the last decades, international trade has increased between industrialised countries and between high-and low-wage countries. This important change has raised questions on how international trade affects the labour market. In this spirit, this paper aims to investigate the impact of international trade on wage dispersion in a small open economy. It is one of the few to: i) use detailed matched employer-employee data to compute industry wage premia and disaggregated industry level panel data to examine the impact of changes in international trade on changes in wage differentials, ii) simultaneously analyse both imports and exports, and iii) examine the impact of imports according to the country of origin. Looking at the export side, we find (on the basis of the system GMM estimator) a positive effect of exports on industry wage premia. The results also show that import penetration has a significant and negative impact on industry wage differentials whatever the country of origin. However, the country of origin appears to matter quite a lot. Indeed, the detrimental effect of imports on wages is found to be significantly bigger when the latter come from low-income countries than from high-income countries. AbstractIn the last decades, international trade has increased between industrialised countries and between high-and low-wage countries. This important change has raised questions on how international trade affects the labour market. In this spirit, this paper aims to investigate the impact of international trade on wage dispersion in a small open economy. It is one of the few to: i) use detailed matched employeremployee data to compute industry wage premia and disaggregated industry level panel data to examine the impact of changes in international trade on changes in wage differentials, ii) simultaneously analyse both imports and exports, and iii) examine the impact of imports according to the country of origin. Looking at the export side, we find (on the basis of the system GMM estimator) a positive effect of exports on industry wage premia. The results also show that import penetration has a significant and negative impact on industry wage differentials whatever the country of origin. However, the country of origin appears to matter quite a lot. Indeed, the detrimental effect of imports on wages is found to be significantly bigger when the latter come from low-income countries than from high-income countries.

The Effect of Foreign Trade on Real Wages: The Case of Turkey

“…Lundin and Yun (2009) stated that exporting industries increase their profits. The firms earning higher profits pay higher wages (Caju, et al, 2011). Riker (2010) considered 60,000 manufacturing worker earnings for the period from 2006 to 2008, and found that exporting capability increases wage premium.…”

Quality Indicators for Statistical Disclosure Methods: A Case Study on the Structure of Earnings Survey

“…The microdata group pursues three directions of research one of which is on wage differentials and modelling of earnings. The SES data is one of the main data sources for this group, used by many authors (see, e.g., Caju et al 2010Caju et al , 2009aMessina et al 2010;Dybczak and Galuscak 2010;Simón 2010;Pointner and Stiglbauer 2010).…”

“…Research studies are usually focused on examining the determinants of disparities in earnings. Earnings comparisons between different industries or regions are frequently performed (see, e.g., Stephan and Gerlach 2005;Caju et al 2010Caju et al , 2009b Bowles et al (2001). The overview of the analyses performed using SES data highlighted that, generally, the log hourly earnings are modelled.…”

“…Pointner and Stiglbauer (2010) use several workplacespecific dummy variables for the employee's occupation (ISCO 1) within the firm, the sector (NACE-2 digits) of the employer, for firm size and location (NUTS-1 digits), and a control for private ownership of the firm as predictors. Caju et al (2010Caju et al ( , 2009b modelled the gross hourly wages with sex, education, age class, number of years of employment, type of employment contract, part/full-time, bonus for shift work, night and/or weekend work, a dummy for paid overtime and occupation sector effect. Messina et al (2010) used a model to predict the log hourly wages with firm size, firm size squared, age class, female employment proportion and proportion of high-and lowskilled workers as predictors.…”