The Effects of Exporting on Wages: An Evaluation Using the 1999 Brazilian Exchange Rate Devaluation

by Lourenco Senne Paz, Syracuse University

The impact of international trade on wages received substantial attention in the last decades. But only recently, the specific effects of exporting status on wage inequality have been investigated in detail. This paper exploits the large and unexpected 1999 Brazilian exchange rate devaluation to identify the effects of exporting on manufacturing firm-level wages. We use Brazilian employer-employee linked data containing detailed information about workers and firms. Our findings indicate that this export shock increased the average wage paid by the more productive firms. Most of this wage increase took the form of a larger wage premium, but increased sorting of workers also played a significant role. Our results support models featuring market access induced skill upgrade and non-neoclassical labor markets. Further scrutiny at the occupation-firm level indicates that white collar occupations' wage increases were solely due to wage premium variation. Skilled blue collar workers also exhibited wage gains, but these gains came in equal shares from increased wage premium and worker sorting. Unskilled blue collar workers had no wage increase. Although export shock affected the wage premium for almost all occupations, in stark contrast with some theoretical models, the skill upgrade happened only for skilled blue-collar occupation.