Exporters and the Rise in Wage Inequality – Evidence from German Linked Employer-Employee Data
45 Pages Posted: 20 Nov 2010
Date Written: November 19, 2010
Using a linked employer-employee data set of the German manufacturing sector, this paper analyses the role of exporting establishments in explaining rising wage dispersion. Over the period of analysis (1996-2007), the raw wage differential between exporters and domestic establishments increased substantially, which can only partly be attributed to corresponding changes in human capital endowments and the returns to them. These findings are consistent with recent heterogeneous-firm trade models that feature an exporter wage premium as well as variability of the premium with respect to increasing trade liberalization. A decomposition analysis shows that the increase in the conditional wage gap indeed contributed to rising wage inequality both within and between skill groups. In contrast, the growing employment share of exporters contributed to a reduction in wage dispersion.
Keywords: Exports, Wages, Exporter Wage Premium, Wage Inequality, Linked Employeremployee Data, Decomposition
JEL Classification: F16, J31
Suggested Citation: Suggested Citation