Discussion Paper Details

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Title: Exports and Wages: Rent Sharing, Workforce Composition or Returns to Skills?

Author(s): Mario Macis and Fabiano Schivardi

Publication Date: April 2012

Keyword(s): Export wage premium and Linked employer employee data

Programme Area(s): International Trade and Regional Economics

Abstract: We use linked employer-employee data from Italy to explore the relationship between exports and wages. Our empirical strategy exploits the 1992 devaluation of the Italian Lira, which represented a large and unforeseen shock to Italian firms' incentives to export. The results indicate that the export wage premium is due to exporting firms both (1) paying a wage premium above what their workers would earn in the outside labor market -- the 'rent-sharing' effect, and (2) employing workers whose skills command a higher price after the devaluation -- the ?skill composition? effect. The latter effect only emerges once we allow for the value of individual skills to differ in the pre- and post-devaluation periods. In fact, using a fixed measure of skills, as typically done in the literature, we would attribute the wage increase only to rent sharing. We also document that the export wage premium is larger for workers with more export-related experience. This indicates that the devaluation increased the demand for skills more useful for exporting, driving their relative price up.

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Bibliographic Reference

Macis, M and Schivardi, F. 2012. 'Exports and Wages: Rent Sharing, Workforce Composition or Returns to Skills?'. London, Centre for Economic Policy Research.