Firms’ Main Market, Human Capital, and Wages

Francisco Alcalá () and Pedro Jesús Hernández Martínez
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Pedro Jesús Hernández Martínez: Departamentos y Servicios::Departamentos de la UMU::Fundamentos del Análisis Económico

Annals of Computational Economics from Murcia University, DIGITUM. Universidad de Murcia

Abstract: This paper contributes to the recent literature on the exporter wage premium. The literature has focused on an exporter/non-exporter dichotomy. Instead, this paper provides first evidence that there is a more continuous destination-market effect. Using Spanish data, we estimate wage premia for establishments selling to the national, European Union, and rest of the world markets (wages in local-market establishments are the reference). Controlling for worker and establishment characteristics, output-market wage premia are increasing in market remoteness and employee education. Establishment human capital is also increasing in output-market remoteness. On the theoretical side, the paper builds a model predicting that firms selling to more-remote markets employ higher human capital and pay higher wages to employees within each education group. The channel linking these variables is firms’ endogenous choice of quality. The model provides a potential explanation for the empirical results in the paper, which is consistent with the evidence on the positive relationship between output-market remoteness and quality of exports put forward by recent trade literature..

Keywords: wage inequality; international trade; Alchian-Allen effect; vertical differentiation (search for similar items in EconPapers)
JEL-codes: F16 J24 J31 (search for similar items in EconPapers)
Date: 2006-12
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Persistent link: http://EconPapers.repec.org/RePEc:mur:wpaper:4102

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