Wages and International Trade

47 Pages Posted: 8 Aug 2003

See all articles by Francis Kramarz

Francis Kramarz

National Institute of Statistics and Economic Studies (INSEE) - National School for Statistical and Economic Administration (ENSAE); National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST)

Date Written: June 2003

Abstract

In this Paper, I present direct micro-econometric evidence of the relation between individual wages of French workers and the import behaviour of their employing firms. First, a model shows that the impact of firms' imports on workers' wages not only comes from movements in the quasi-rent induced by competitive pressures but also from alterations of workers and firms threat points in the bargaining process induced by trade. To estimate this model, I use a unique matched employer-employee data source that contains information on firms' inputs, including imports by type of product and by country of origin, as well as individual characteristics of a representative sample of workers employed at those firms. Because the quasi-rent - a firm-level variable - and seniority - a person-level variable directly affected by import competition are endogenous in the wage equation, I use export prices of U.S. firms to various destinations as instruments. To summarize my results, I find a bargaining power below 0.20. I also show that workers' wages deteriorate through competitive pressures. Two effects are at play. In industries where firms actively import finished goods, workers' wage is decreased. But, firms own imports of the same goods 'protect' its workers through a hold-up effect. The total effect is negative for most workers. Highly educated workers appear to benefit from trade, in stark contrast with less educated workers. Also, very experienced workers, when still employed in manufacturing firms, appear to benefit from the hold-up effect but to be most affected by the firm's competitor's imports.

Keywords: International trade, wages, competition, imports, bargaining

JEL Classification: F30, F40, J30

Suggested Citation

Kramarz, Francis, Wages and International Trade (June 2003). Available at SSRN: https://ssrn.com/abstract=432700

Francis Kramarz (Contact Author)

National Institute of Statistics and Economic Studies (INSEE) - National School for Statistical and Economic Administration (ENSAE) ( email )

92245 Malakoff Cedex
France

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST)

15 Boulevard Gabriel Peri
Malakoff Cedex, 1 92245
France

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