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Trade Exposure, Export Intensity, and Wage Volatility: Theory and Evidence

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  • Daniel A. Traca

    (Solvay Business School, Université Libre de Bruxelles)

Abstract

This paper addresses the link between trade exposure and wage volatility. First, it shows, in a simple model, that trade exposure magnifies the impact of domestic productivity shocks on industry-specific labor demand, particularly for the less export-intensive industries, and that, if labor is not perfectly mobile, this implies a rise in wage volatility. Then, it tests these predictions, using industry data. The empirical results confirm that wage volatility increases with an industry's degree of openness, and that it declines with an increase in the industry's export intensity. © 2005 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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  • Daniel A. Traca, 2005. "Trade Exposure, Export Intensity, and Wage Volatility: Theory and Evidence," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 336-347, May.
    • Handle: RePEc:tpr:restat:v:87:y:2005:i:2:p:336-347
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    Cited by:

    1. Coeurdacier, Nicolas, 2009. "Do trade costs in goods market lead to home bias in equities?," Journal of International Economics, Elsevier, vol. 77(1), pages 86-100, February.
    2. Daniel A. Traca, 2005. "Globalization, Wage Volatility, and the Welfare of Workers," Review of International Economics, Wiley Blackwell, vol. 13(2), pages 237-249, May.
    3. Paula Garda & Volker Ziemann, 2014. "Economic Policies and Microeconomic Stability: A Literature Review and Some Empirics," OECD Economics Department Working Papers 1115, OECD Publishing.
    4. Daniel A. Traca, 2005. "Labor Markets and Kaleidoscopic Comparative Advantage," Review of International Economics, Wiley Blackwell, vol. 13(3), pages 431-444, August.

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