Exporting, Foreign Direct Investment, and Wages: Evidence from the Canadian Manufacturing Sector

Abstract

Do exporters and foreign-controlled establishments pay their workers higher wages than non-exporters and domestic-controlled establishments? This paper draws on an employer–employee data set to explore the existence of exporter and foreign-owned wage premiums in the Canadian manufacturing sector. Results from wage regression models reveal that, on the whole, exporters and foreign-controlled plants do pay higher wages than non-exporters and domestic-controlled plants. These results hold even after controlling for other plant and worker characteristics, although the wage differentials are substantially smaller. Furthermore, while the impact of foreign ownership on wages is found to be widespread across industries and regions, that of exporting is not. At the industry level, the wage effects of export-market participation are strongest for workers in plants belonging to scale-based industries; regionally, they are strongest in Quebec and British Columbia.

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