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Research Details
Trade Shocks, Firm Hierarchies and Wage Inequality, Review of Economics and Statistics
Abstract
This paper shows robust effects of trade shocks on within-firm wage inequality through changes in firm hierarchies. It uses two distinct research designs\textemdash one considering firm-level shocks to foreign demand and transportation costs, the other analyzing the Muslim boycott of Danish exports after the 2006 ``Cartoon Crisis''. Consistent with knowledge-based and incentive-based hierarchy models, trade shocks affect organizational choices through production scale. Adding a hierarchy layer increases inequality throughout the organization, particularly widening the 90-50 wage gap and pay differences between top and bottom layers. Delayering after the boycott leads to wage compression through wage cuts, demotions, and employee turnover.
Type
Article
Author(s)
Date Published
2021
Citations
Friedrich, Benjamin. 2021. Trade Shocks, Firm Hierarchies and Wage Inequality. Review of Economics and Statistics.