Highlights :

• On average exporting firms in developing countries pay 31 percent higher wages than non-exporters. However, this average masks lots of cross country variation. The data also shows that exporting firms are on average much larger.
• Conditional on skilled labor utilization, technology sophistication, imported input use, and productivity, the wage export premium disappears completely and the employment premium decreases significantly.
• We find that exporters in Chile need to perform skill intensive activities and tasks but in general exporting per se may not necessarily lead to higher skill utilization.
• We find robust evidence that, worldwide, industries that ship products to high-income destinations pay higher average wages. This is because, on average, they export higher quality goods and the provision of quality is costly and requires more intensive use of higher-wage skilled labor.

 Abstract :
We study the relationship between exports, employment, and wages in developing countries using both firm and industry level data. The firm level data shows that on average exporters pay 31 percent higher wages than non-exporters. The data also reveals that exporting firms are on average much larger. We build a model that allows us to study the main mechanisms that explain the export premium. These are skilled labor utilization, technology sophistication, imported input use, and productivity. We find that, conditional on all the mechanisms, the wage export premium disappears completely. To establish causality we use firm-level panel data from Chile and instrument variables capturing exogenous export opportunities for firms. The estimations show that conditional on size, firms that export a higher share of their total sales utilize more skilled (and also highly-skilled) workers, and less unskilled workers. This implies that exporters need to perform skill intensive activities and tasks. We finally assess the argument that exporting per se may not necessarily lead to higher skill utilization and what matters is the destination of a firms' exports. We use a panel of industries and countries to establish whether the destination of a country's exports is relevant for skill utilization and to take this as evidence of a demand for high quality products in export markets. We find robust evidence that, worldwide, industries that ship products to high-income destinations do pay higher average wages. We also find that industries that ship products to high-income destination export higher quality goods and that the provision of quality is costly and require more intensive use of higher-wage skilled labor.

 Keywords : export wage premium | exports to high-income destination | skill utilization

 JEL : F13, F14, J23