Who Trades with Whom? Exploring the Links between Firms' International Activities, Skills, and Wages

Abstract

Using firm-level data on the Italian manufacturing industry, we examine how trade activities are related to workforce composition and wages. We contribute to empirical research on these issues in three ways. First, we provide new evidence that is consistent with multi-attribute models on firm heterogeneity and trade. We show that even after controlling for various company characteristics, including size and capital intensity, exporters still pay higher wages and employ more skilled workers than nonexporters. Second, we consider engagement in international transactions, either by means of exports, imports, or a combination of the two. We show that failing to control for importing activities may bias upward export premia. Third, we look at how the wage and the employment structures of trading firms change with the country of destination and origin of trade flows. We find that wage and skill premia are influenced by the characteristics of partner countries.