The effects of exporting on wages: An evaluation using the 1999 Brazilian exchange rate devaluation

• Published in: Journal of development economics Vol. 111; pp. 1 - 16
• Main Authors: Araújo, Bruno César, Paz, Lourenço S.
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 01-11-2014; Elsevier Sequoia S.A
• Subjects: Attention; Brazil; Currency devaluation; Effects; Exchange rate devaluation; Exchange rates; Exports; Foreign exchange rates; Heterogeneous firms; Latin America; Manufacturing; Productivity; Skill upgrade; Studies; Variance; Wage differential; Wage inequality; Wage premium; Wages; Wages & salaries; Workers; Brazil; Brazil; Wage premium; Exchange rate devaluation; Wage inequality; Skill upgrade; Heterogeneous firms
• ISSN: 0304-3878; 1872-6089
• DOI: 10.1016/j.jdeveco.2014.07.005

The impact of international trade on wages has received substantial attention in recent decades; but only recently the specific effects of exporting on wage inequality have been investigated in detail. This paper employs the unexpected 1999 Brazilian exchange rate devaluation to identify the effects of exporting on Brazilian manufacturing firm-level wages using employer–employee linked data. We find that this export shock increased the average wage gap between the high and low productivity firms. Most of this wage increase took the form of a larger wage premium, but increased sorting of workers also played a significant role. Further scrutiny at the occupation–firm level indicates that the wage increases of managerial white-collar occupations came solely from wage premium variations. Skilled blue-collar workers also exhibited wage gains, but these gains came in equal shares from increased wage premium and worker sorting; the remaining occupational categories saw no wage increase.
•The 1999 Brazilian exchange rate devaluation is used as an export shock.•The impact of this export shock on manufacturing wages is positive.•67% of this wage raise comes from wage premium changes and 33% from skill upgrade.•Managerial white-collar occupation wage raises occurred only via wage premium.•Skilled blue-collar occupation wage increases occurred by both channels.