NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Exchange Rates and Wages

Linda Goldberg, Joseph Tracy

NBER Working Paper No. 8137
Issued in February 2001
NBER Program(s):   IFM   ITI   LS

The effects of exchange rate fluctuations across the population is an important issue for increasingly globalized economies. Previous studies using industry aggregate data have found differences across industries in the labor market implications of exchange rates, reporting that industry wages are significantly more responsive than industry employment. We offer an explanation for this paradoxical finding. Using Current Population Survey data for 1976 through 1998, we document that the main mechanism for exchange rate effects on wages occurs through job turnover and the strong consequences this has for the wages of workers undergoing such job transitions. By contrast, workers who remain with the same employer experience little if any wage impacts from exchange rate shocks. In addition, we find that the least educated workers who also have the most frequent job changes shoulder the largest adjustments to exchange rates.

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Document Object Identifier (DOI): 10.3386/w8137

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