Abstract
Three types of theories have been used to explain the wage premium in foreign firms: the theories of heterogeneous workers, heterogeneous learning, and heterogeneous firms. We set up a model that explicitly encompasses two of these theories, and that can illustrate the third. This unifying framework allows us to rigorously compare the predictions of the different theories. Thus, it is a useful tool for interpreting new and existing empirical evidence. We illustrate the usefulness of the model on matched employer−employee data, and we find considerable support for all three theories. In particular, the theory of heterogeneous workers can explain up to 75 percent of the premium.
Original language | English |
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Journal | Scandinavian Journal of Economics |
Volume | 115 |
Issue number | 2 |
Pages (from-to) | 292-325 |
ISSN | 0347-0520 |
DOIs | |
Publication status | Published - Apr 2013 |
Bibliographical note
JEL Classification: F2;F16;F23Keywords
- Faculty of Social Sciences