Within-firm wage inequality and firm-level exports

This paper analyzes changes in within-firm inequality of hourly wages arising from export shocks to exporting firms in Denmark. We provide causal evidence that export demand shocks increase within-firm inequality. Decomposing overall inequality into within and between components for occupational and educational groups, the results show that exports lead to a significant increase in within-group wage inequality but do not affect the between-group component. We develop a partial equilibrium model, featuring heterogeneous workers, which rationalizes these observations and shows how export demand shocks induce a complementarity effect, leading to increases in wage inequality within firms.