Goldberg and Joseph
Understanding the effects of exchange
rate fluctuations across the population isimportant for increasingly
globalized economies. Previous studies using industry aggregate
data have found that industry wages are significantly more
responsive than industry employment to exchange rate changes.
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 workerswho
also have the most frequent job changesshoulder the
largest adjustments to exchange rates.