Firms' Main Market, Human Capital and Wages

Francisco Alcalá and Pedro Hernandez

MPRA Paper from University Library of Munich, Germany

Abstract: Recent international trade literature emphasizes two features in characterizing the current patterns of trade: efficiency heterogeneity at the firm level and quality differentiation. This paper explores human capital and wage differences across firms in that context. We build a partial equilibrium model predicting that firms selling in 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. Predictions are tested using Spanish employer-employee matched data that classify firms according to four main destination markets: local, national, European Union, and rest of the World. Employees’ average education is increasing in the remoteness of firm’s main output market. Market–destination wage premia are large, increasing in the remoteness of the market, and increasing in individual education. These results suggest that increasing globalization may play a significant role in raising wage inequality within and across education groups.

Keywords: vertical differentiation; exporters; Alchian-Allen effect; wage inequality; unobservable skills (search for similar items in EconPapers)
JEL-codes: F16 J24 J31 (search for similar items in EconPapers)
Date: 2009, Revised 2009
New Economics Papers: this item is included in nep-bec, nep-hrm and nep-lab
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Related works:
Journal Article: Firms’ main market, human capital, and wages (2010)
Working Paper: Firms’ Main Market, Human Capital, and Wages (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:19403

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