Exports, Export Destinations, and Skills
2010
World Bank
This paper explores the links between exports, export destinations and skill utilization by firms. The authors identify two mechanisms behind these links, which we integrate into a unified theory of export destinations and skills. First, exporting to high-income countries requires quality upgrades that are skill-intensive (Verhoogen, 2008). Second, exporting in general, and exporting to high-income destinations in particular, requires services like distribution, transportation, and advertising, activities that are also intensive in skilled labor (Matsuyama, 2007). Both theories suggest a skill-bias in export destinations: firms that export to high-income destinations hire more skills and pay higher wages than firms that export to middle-income countries or that sells domestically. The authors test the theory using a panel of manufacturing Argentine firms. The data cover the period 1998-2000 and thus span the Brazilian currency devaluation of 1999. The authors use the exogenous changes in exports and export destinations brought about by this devaluation in a major export partner to identify the causal effect of exporting and of exporting to high-income countries on skill utilization. The authors fine that Argentine firms exporting to high-income countries hired a higher proportion of skilled workers and paid higher average wages than other exporters (to non high-income countries) and domestic firms. Instead, the authors cannot identify any causal effect of exporting per se on either skill utilization or average wages.
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