Exporting and Labor Demand: Micro-Level Evidence from Germany

Posted: 20 Jul 2013

See all articles by Andreas Lichter

Andreas Lichter

IZA

Andreas Peichl

ZEW – Leibniz Centre for European Economic Research; University of Mannheim - School of Economics (VWL); IZA Institute of Labor Economics; University of Essex - Institute for Social and Economic Research (ISER)

Sebastian Siegloch

IZA Institute of Labor Economics; University of Mannheim - Department of Economics; ZEW – Leibniz Centre for European Economic Research - Corporate Taxation and Public Finance Research; CESifo (Center for Economic Studies and Ifo Institute)

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Abstract

It is widely believed that globalization increases the volatility of employment and decreases the bargaining power of workers. One mechanism explaining this relationship is given by the long-standing Hicks-Marshall laws of derived demand: with international trade increasing competition and therefore the price elasticity of product demand, exporters are predicted to have higher labor demand elasticities. Our paper is the first to test this relationship empirically by analyzing the effects of exporting on firms' labor demand. Using rich, administrative linked employer-employee panel data from Germany, we explicitly control for issues of self-selection and endogeneity in the firms' decisions to export by providing fixed effects and instrumental variable estimates. Our results show that exporting indeed has a positive and significant effect on the own-wage elasticity of unconditional labor demand, due to higher price elasticities of product demand.

Keywords: trade, export, labor demand, wage elasticity, microdata, Germany

JEL Classification: F16, F66, J23

Suggested Citation

Lichter, Andreas and Peichl, Andreas and Siegloch, Sebastian, Exporting and Labor Demand: Micro-Level Evidence from Germany. IZA Discussion Paper No. 7494. Available at SSRN: https://ssrn.com/abstract=2296301

Andreas Lichter (Contact Author)

IZA ( email )

No Address Available

Andreas Peichl

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

University of Mannheim - School of Economics (VWL) ( email )

Mannheim 68131
Germany

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

University of Essex - Institute for Social and Economic Research (ISER)

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom

Sebastian Siegloch

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

University of Mannheim - Department of Economics ( email )

D-68131 Mannheim
Germany

ZEW – Leibniz Centre for European Economic Research - Corporate Taxation and Public Finance Research ( email )

United States

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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