This paper analyzes how intra-industry trade affects the wage distribution when both workers and firms are heterogeneous. Positive assortative matching between worker skill and firm technology generates an employer size-wage premium and an exporter wage premium. Fixed export costs cause the selection of advanced technology, high skill firms into exporting and trade shifts the firm technology distribution upwards. Consequently, trade increases skill demand and wage inequality in all countries, both on aggregate and within the upper tail of the wage distribution. This holds when firms receive random technology draws and when technology depends on firm level R&D.
"Selection into Trade and Wage Inequality."
American Economic Journal: Microeconomics,
Trade and Labor Market Interactions
Human Capital; Skills; Occupational Choice; Labor Productivity
Wage Level and Structure; Wage Differentials