Export Decision, the Division of Labor, and Skill Intensity

Shintaku, Koji (2015): Export Decision, the Division of Labor, and Skill Intensity.

Abstract

This paper theoretically investigates how trade affects skill intensity at firm level. In order to analyze this, we develop a model in which firms engages in the division of labor within firms by in putting two types of labor. Unskilled labor is inputted into the production line of the production division and skilled labor is inputted into the production division to conduct the production line. Firms can reduce marginal cost by promoting the division of labor in the production division. Both types of labor are also inputted into head office for domestic market and for export market. These head offices are different in skill intensity. Though all firms are ex-ante identical, the division of labor of exporters is stronger than that of non-exporters on the unique equilibrium. That fixed labor input of headquarter division for export market is more skill intensive than that for domestic market is equivalent to the fact that total labor input of exporters is more skilled intensive than that of non-exporters. Furthermore, all firms reduce the type of labor inputted intensively into head quarter division for the export market while raising the type of labor inputted less intensively into that division.

• Item Type: MPRA Paper
• Language: English
• Keywords: export decision; division of labor within firms; skill intensity
• Subjects: F - International Economics > F1 - Trade > F12 - Models of Trade with Imperfect Competition and Scale Economies ; Fragmentation

References

Butos, P. (2011).``Trade Liberalization, Exports, and Technology Upgrading: Evidence on the impact of MERCOSUR on Argentinian Firms." American Economic Review, 101(1): 304-340.

Chaney, T., and R. Ossa. (2013).``Market Size, Division of Labor, and Firm Productivity.'' Journal of International Economics, 90(1): 177--180.

Davidson, C., F. Heyman, S. Matusz, F. Sjoholm, and S. C. Zhu. (2013).``Globalization and Organization of the Firm." Mimeo.

Ekholm, K. and K. H. Midelfart. (2005).``Relative Wages and Trade-Induced Changes in Technology."European Economic Review, 49: 1637-1663.

Harrigan, J. and A. Reshef. (2011).``Skill Biased Heterogeneous Firms, Trade Liberalization, and The Skill Premium." NBER Working Paper Series, No. 17604.

Holmes, T. J. and M. F. Mitchell (2008).``A Theory of Factor Allocation and Plant Size. " Rand Journal Economics, 39(2): 329-351.

Medin, H. (2003).``Firm's export decisions-fixed trade costs and the size of the export market." Journal of International economics, 61: 225-241.

Shintaku, K. (2015).``Change in Fixed Costs and the Division of Labor within Firms through Labor Reallocation.” MPRA working paper series, No. 62644.

Yeaple, S. R. (2005).``A Simple model of Firm Heterogeneity, International Trade, and Wages." Journal of International Economics, 65(1): 1-20.

Zadeh, S. A. M. (2013).``Labor Specialization and the Impact of International Trade on the Skill Premium." Job Market Paper.