Department Seminar, Wednesday September 15

Tomorrow (Wednesday, September 15), Eric Verhoogen of Columbia University will present his work studying the relationship between exports and wage premia for Mexican workers. Prof. Verhoogen's research addresses questions in development and trade and is part of a broader literature that is taking the study of trade beyond frictionless "neoclassical" models. An abstract of the paper is below.

All department seminars are held in Kreeger 101 from 12:00-1:15. Please join us for this exciting opportunity.

ABSTRACT

This paper draws on a new combination of employer-employee and plant-level data from Mexico to investigate the relationship between exports and wage premia, defined as wages above what workers would receive elsewhere in the labor market. We first use detailed information on individual workers' wage histories to decompose plant-level average wages into a component reflecting skill composition and a component reflecting wage premia. Our estimating procedure allows for changes in the return to ability and feedback from current idiosyncratic shocks to future mobility. We then use the peso devaluation of late 1994, which we argue generated an exogenous differential inducement to export within industries, to estimate the eect of export incentives on the two components. Comparing across plants within industries, we find that approximately two-thirds of the higher level of wages in larger, more productive plants is explained by higher levels of wage premia, and that nearly all of the differential within-industry wage change due to the export shock is explained by changes in wage premia. The findings argue against the hypothesis that sorting on individual ability is solely responsible for the well-documented correlation between exporting and wages.