Furthermore,  in  the  presence  of  labor  market  frictions,  changes  in  trade  protection  may result  in  differential  changes,  in  exporting  firms  relative  to  non-­‐exporting  firms,  in  the wages  of  ex-­‐ante  identical  workers.  For  instance,  if  firms  engage  in  some  form  of  rent sharing  with  their  workers,  the  wages  of  workers  employed  in  exporting  firms,  which experience  a  relative  improvement  in  their  profits  or  market  share  after  a  decline  in protection,  will  correspondingly  be  better  compared  to  workers  employed  in  firms  serving only  the  domestic  market  (Egger  and  Kreickemeier  (2009)  and  Amiti  and  Davis (forthcoming)).   Equally,  if  the  labor  allocation  process  is  subject  to  search  and  matching frictions,  exporting  firms  may  screen  (ex-­‐ante  identical)  workers  more  intensively,  employ workers  of  higher  match-­‐specific-­‐ability,  and  pay  higher  wages  relative  to  non-­‐exporting firms  as  Helpman,  Itskhoki,  and  Redding  (2010)  have  shown  in  their  comprehensive theoretical  analysis  of  the  links  between  trade  and  labor  markets  in  this  context.  Here, opening  the  economy  to  trade  is  predicted  to  alter  this  wage  gap  between  exporting  and non-­‐exporting  firms  and  to  affect  wage  inequality.<sup>4</sup> Does  trade  liberalization,  in  fact,  affect  differently  workers  employed  in  exporting  firms relative  to  non-­‐exporting  firms?  We  explore  this  issue  empirically  using  a  detailed  dataset with  matched  employer-­‐employee  data  on  workers  in  Brazil  for  the  years  1990-­‐1998.  The dataset  traces  individually  identifiable  workers  across  employers  over  time  and  contains detailed  information  on  worker  characteristics  such  as  age,  gender,  education,  occupation, and  tenure  at  the  firm  which  allows  us  to  suitably  account  for  the  role  of  unobservable worker  and  firm  characteristics  in  determining  wages.  We  complement  this  worker-­‐level information  with  firm-­‐level  data  on  exporter  status  from  the  Brazilian  Customs  Office,  and industry-­‐level  information  on  trade  protection  levels  to  capture  Brazil’s  main  trade  policy

> 4   More   generally,   the   various   channels   linking   trade   protection   to   wages   that   we   describe   are   each potentially   associated   with   changes   in   within-­‐group   inequality   (inequality   between   workers   with identical   observable   characteristics),   in   changes   in   between-­‐group   inequality   (inequality   between workers   with   different   characteristics,   such   as,   levels   of   education)   and   possibly   even   no   change   in inequality   at   all.      For   instance,   under   the   rent-­‐sharing   mechanism,   within-­‐group   inequality   will change   following   trade   liberalization   if   otherwise   identical   workers   are   employed   at   firms   which experience   differential   profit   changes.   Alternatively,   if   trade   liberalization   changes   the   returns   to worker   characteristics,   this   will   result   in   a   change   in   between-­‐group   inequality.   Finally,   if   workers are   paid   competitive   wages   and   the   only   impact   of   trade   liberalization   is   to   reallocate   workers   across firms   without   any   changes   in   the   returns   to   worker   characteristics,   there   will   be   no   change   in   either within-­‐group   or   between-­‐group   wage   inequality.

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