 Exchange Rate, External Orientation of Firms and Wage AdjustmentFrancesco Nucci and Alberto Pozzolo Economics & Statistics Discussion Papers from University of Molise, Department of Economics Abstract: We estimate the effect of exchange rate movements on ï¬ rm-level wages, using a representative panel of manufacturing ï¬ rms. We show that the direction and size of wage adjustment is shaped by the international exposure of each ï¬ rm on both the sale and cost side of the balance sheet, similar to the response of employment documented in Nucci and Pozzolo (2010). Through the revenue side, wages tend to rise after a currency depreciation and the effect is more pronounced the higher is the ï¬ rm’s exposure to sales from exports. Through the expenditure side, a depreciation induces a cut in the ï¬ rm’s wages, and the effect is larger the higher is the incidence of imported inputs in total production costs. For a given degree of external orientation, both these effects are larger for ï¬ rms with a lower market power. Moreover, we document that the effect of exchange rates on wages is shaped by (i) the extent of sectoral import penetration in the domestic market; (ii) the proportion of newly hired workers in each ï¬ rm in a given year; and (iii) the composition of the ï¬ rm’s workforce by occupational category. Keywords: Exchange Rate; Firms' Foreign Exposure; Wages. (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:mol:ecsdps:esdp12066 Access Statistics for this paper More papers in Economics & Statistics Discussion Papers from University of Molise, Department of Economics Contact information at EDIRC. |
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