Trade, Firms, and Wages: Theory and Evidence

46 Pages Posted: 22 Jun 2008 Last revised: 19 Jul 2010

See all articles by Mary Amiti

Mary Amiti

Federal Reserve Bank of New York

Donald R. Davis

Columbia University, Graduate School of Arts and Sciences, Department of Economics; National Bureau of Economic Research (NBER)

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Date Written: June 2008

Abstract

How does trade liberalization affect wages? This is the first paper to consider in theory and data how the impact of final and intermediate input tariff cuts on workers' wages varies with the global engagement of their firm. Our model predicts that a fall in output tariffs lowers wages at import-competing firms, but boosts wages at exporting firms. Similarly, a fall in input tariffs raises wages at import-using firms relative to those at firms that only source locally. Using highly detailed Indonesian manufacturing census data for the period 1991 to 2000, we find considerable support for the model's predictions.

Suggested Citation

Amiti, Mary and Davis, Donald R., Trade, Firms, and Wages: Theory and Evidence (June 2008). NBER Working Paper No. w14106. Available at SSRN: https://ssrn.com/abstract=1149352

Mary Amiti

Federal Reserve Bank of New York ( email )

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New York, NY 10045
United States

Donald R. Davis (Contact Author)

Columbia University, Graduate School of Arts and Sciences, Department of Economics ( email )

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New York, NY 10027
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212-854-4037 (Phone)
212-854-8059 (Fax)

National Bureau of Economic Research (NBER)

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