No abstract

In this paper, we use a linked employer-employee database from Brazil to evaluate the wage effects of trade reform. With an aggregate (firm-level) analysis of this question, we find that a decline in trade protection is associated with an increase in average wages in exporting firms relative to domestic firms, consistent with earlier studies. However, using disaggregated, employer-employee level data, and allowing for the endogenous assignment of workers to firms due to match-specific productivity, we find that the premium paid to workers at exporting firms is economically and statistically insignificant, as is the differential impact of trade openness on the wages of workers at exporting firms relative to otherwise identical workers at domestic firms. We also find that workforce composition improves systematically in exporting firms, in terms of the combination of worker ability and the quality of worker-firm matches, post-liberalization. These results stand in stark contrast to the findings reported in many earlier studies and underscore the importance of endogenous matching and, more generally, non-random labor market allocation mechanisms, in determining the effects of trade policy changes on wages.

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The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

Summary. -Comprehensive linked employer-employee data allow us to study the relationship between domestic formal sector migration in Brazil and globalization. Considerable worker flows in the formal labor market during 1997-2001 are directed toward lower income regions-the reverse flows of those often posited for informal labor markets. Estimation of the worker's multi-choice migration problem shows that previously unobserved employer covariates are significant predictors associated with migration flows. These results support the idea that globalization acts on internal migration through job stability at exporting establishments and employment opportunities at locations with a concentration of foreign owned establishments. A 1% increase in exporter employment predicts a 0.3% reduced probability of migration. A 1% increase in the concentration of foreign owned establishments at potential destinations is associated with a 0.2% increase in the migration rate.