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Export Destination, Product Quality and Wages in a Middle Income Country. The Case of South Africa Export Destination, Product Quality and Wages in a Middle Income Country. The Case of South Africa HOT

A robust finding in the firm-level literature is that exporting firms pay higher wages. However, in many cases these results are at the firm-level and do not control for worker specific characteristics. In this paper we use data from South Africa and four other SADC countries to expand on the growing body of research that uses matched employer-employee data to investigate the relationship between exporting and wages at a worker level. South Africa, a middle-income country, has two distinct main export markets – a regional market in SADC where per capita incomes are lower than at home and an international market, predominantly the United States and Western Europe, where per capita incomes are higher than at home. We exploit this distinction to investigate whether export destination impacts on wages. Our estimates show that workers in South African firms that export to the region earn less than those that produce for the domestic market. Those in firms that export outside the region earn more than either domestic producers or SADC-only exporters. These results support previous  theoretical and empirical work which suggests that export destination is related to product quality which in turn is related to worker quality and therefore wages.

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Version 2013
Category Theme 2: Employment, unemployment and livelihoods
Author Neil Rankin, Volker Schöer