Research

JEL: F14, F16, J31

Abstract: This paper studies the implications for wage inequality of two distinct forms of globalisation, namely trade and foreign direct investment. I use German linked employer-employee data to (1) jointly estimate the exporter and the multinational wage premium and (2) to further distinguish between wage premia of multinational firms that are foreign owned (inward FDI) and domestically owned (outward FDI). My findings exhibit a clear hierarchy of firms’ international activities with regard to wage premia. I interpret these patterns using a theoretical framework, which incorporates ex-ante homogeneous workers, heterogeneous firms and search and matching frictions into a three-region model of trade and FDI with monopolistic competition. The model allows me to account for the observed empirical patterns, and delivers novel insights about the interplay between trade, FDI and labour market institutions.

JEL: E24, I24, J21, J14, J31

Abstract: This paper uses the structure of a two-sector two-factor model to attribute changes in the skill premium across countries to three potential sources: (i) changes in the relative abundance of skilled workers, (ii) technological change and (iii) market size effects due to external economies of scale. I employ the development and growth accounting methodology as analytic tool to assess the relative importance of each one of these channels in explaining changes in the skill premium across countries and time. My findings add to the growing evidence that there is hardly any association between changes in the relative supply of skills and the observed evolution of the skill-premium. Furthermore, I show that the measure of the importance of market size effects governs the strength of the relationship between technological change and the skill-premium. Moreover, for strong enough economies of scale, an increase in the relative supply of skills increases the skill premium. Importantly, this finding points out that the scale of the economy may be an important factor in shaping developments of the skill premium, independent of the specific features of technological change.

Abstract. In 2011, the government of Rwanda implemented a health insurance premium policy change that led to a 200 percent increase in premiums to richer households and provided a premium waiver to poorer households identified through a community-based targeting process. We use three rounds of nationally representative cross-sectional surveys and apply a difference-in-differences with kernel propensity score matching to estimate the effect of this policy change on various labour market indicators in the short and medium terms. We find that premium increases had retrogressive effects non-agricultural time allocation and desire for additional work. Premiums waivers on the other hand led to reduction in hours allocated to wage activities and the probabilities of wage employment and desire for additional work though these effects did not sustain in the medium term. Gender and age desegregated heterogeneous assessments reveal that men and richer individuals responded to these changes more than the rest. The policy implications of this paper suggest that a revisiting of the community-based targeting is worthwhile especially in light of stalling poverty reduction in Rwanda in the last decade.