Leadership

Wage Effects Of Trade Reform With Endogenous Worker Mobility

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Executive Summary

In this paper, the authors use a linked employer-employee database from Brazil to examine the impact of trade reform on the wages of workers employed at heterogeneous firms. Their analysis of data at the firm level confirms earlier findings of a differential positive effect of trade liberalization on average wages at exporting firms relative to non-exporting firms. However, the analysis of average firm-level wages is incomplete along several dimensions. First, it cannot fully account for the impact of a change in trade barriers on workforce composition, especially in terms of unobservable (time-invariant) worker characteristics (innate ability) and any additional productivity that results from employment in a specific firm (match-specific ability).

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