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By Rod Ludema Georgetown University

Comments on: Krishna, Poole and Senses, "Trade Liberalization, Firm Heterogeneity,  and  Wages: New Evidence from Matched  Employer–Employee Data". By Rod Ludema Georgetown University. Question.

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By Rod Ludema Georgetown University

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  1. Comments on:Krishna, Poole and Senses, "Trade Liberalization, Firm Heterogeneity,  and  Wages: New Evidence from Matched  Employer–Employee Data" By Rod Ludema Georgetown University

  2. Question • Average wages at exporting firms rise relative to non-exporting firms in response to trade liberalization. Why? • Possibilities • Changes in returns to worker characteristics + differences in workforce composition between firms. • Differential changes in workforce composition • Efficiency wages • Rent-sharing • Matching

  3. Answer • The differential wage response goes away when one controls for worker-firm match effects. • Interpretation: export firms do not respond to liberalization by increasing (relative to non-export firms) the wages of existing workers. • Thus, differential must be due to compositional changes in either unobserved time-invariant  worker characteristics or match quality.

  4. Comments • Trade policy measures • Tariffs on output and ERP • What about ? • NTBs • Reciprocal tariff cuts • Preferential tariffs • Common external tariffs • What is going on with the real exchange rate? • It seems to be always significant, even with match effects.

  5. Stylistic Comments • If the answer is in the final regression, why all of the rest? • Repetition – methodology is explained in the intro, the methodology section and again in the results section. • Twenty pages before the first regression result.

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