This paper draws on employer-employee and longitudinal plant data from Mexico to investigate the impact of exports on wage premiums, defined as wages above what workers would receive elsewhere in the labor market. We decompose plant-level average wages into a component reflecting skill composition and a component reflecting wage premiums. Using the late-1994 peso devaluation interacted with initial export propensity as a source of exogenous changes in exports, we find that exports have a significant positive effect on wage premiums and that the effect on wage premiums accounts for essentially all of the medium-term effect of exporting on plant-average wages.

Comparing two sources of wage data in Mexico—firms' reports to the social security agency and individuals' responses to a household survey—we document extensive underreporting of wages by formal firms, with compliance better in larger firms. We also present evidence that the 1997 Mexican pension reform, which tied pension benefits more closely to reported wages for younger workers, led to a relative decline in underreporting for younger age groups. The results suggest that giving employees incentives and information to improve the accuracy of employer reports can be an effective way to improve payroll tax compliance.