Working Paper: CEPR ID: DP8931
Authors: Mario Macis; Fabiano Schivardi
Abstract: We use linked employer-employee data from Italy to explore the relationship between exports and wages. Our empirical strategy exploits the 1992 devaluation of the Italian Lira, which represented a large and unforeseen shock to Italian firms' incentives to export. The results indicate that the export wage premium is due to exporting firms both (1) paying a wage premium above what their workers would earn in the outside labor market -- the 'rent-sharing' effect, and (2) employing workers whose skills command a higher price after the devaluation -- the ?skill composition? effect. The latter effect only emerges once we allow for the value of individual skills to differ in the pre- and post-devaluation periods. In fact, using a fixed measure of skills, as typically done in the literature, we would attribute the wage increase only to rent sharing. We also document that the export wage premium is larger for workers with more export-related experience. This indicates that the devaluation increased the demand for skills more useful for exporting, driving their relative price up.
Keywords: export wage premium; linked employer-employee data
JEL Codes: F16; J31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Devaluation of the Italian lira in 1992 (F31) | Increase in wages at exporting firms (F16) |
| Devaluation of the Italian lira in 1992 (F31) | Rent sharing effect (R21) |
| Devaluation of the Italian lira in 1992 (F31) | Skill composition effect (J24) |
| Increase in wages at exporting firms (F16) | Export wage premium for workers with export-related experience (F16) |
| Changes in market value of skills (J24) | Overestimation of the rent-sharing component (D33) |