Exporting and endogenous workplace amenities under monopsonistic competition

This paper introduces endogenous workplace quality choice into an international trade model with a monopsonistically competitive labour market, in which firms compete for potential employees by offering them a combination of monetary and non-monetary benefits. To attract the workers required to produce for the foreign market in addition to the domestic market, exporting firms have to offer more attractive compensation to their employees than comparable non-exporting firms, which is why they are not only paying higher wages but also offering better workplace amenities. The gains from trade, therefore, not only materialise in terms of a higher purchasing power but also in terms of a higher average workplace quality. Welfare metrics, which exclusively focus on real income gains, might underestimate the gains from globalisation.