Worker-Specific Effects of Globalisation

This paper sets up a general equilibrium model in which firms differ in their productivity, and workers have fairness preferences and hence provide full effort only if their wage is sufficiently high. With the wage considered fair by workers depending on the operating profits of the firm in which they are employed, more productive firms pay higher wages. We study trade between two symmetric countries. Exporters have higher operating profits, leading to an exporter wage premium. There are worker-specific effects of trade due to both the exporter wage premium and a reallocation of workers between firms