We propose a theory of task trade between countries that have similar relative factor endowments but may di¤er in size. Firms produce di¤erentiated goods by performing a continuum of tasks, each of which generates local spillovers. Tasks can be performed at home or abroad, but o¤shoring entails costs that vary by task. In equilibrium, the tasks with the highest o¤shoring costs may not be traded. Among the remainder, those with the relatively higher o¤shoring costs are performed in the country that has the higher wage and higher aggregate output. We discuss the relationship between equilibrium wages, equilibrium outputs, and relative country size and examine how the pattern of specialization re‡ects the key parameters of the model.

The analyses, opinions and findings of these papers represent the views of the authors, they are not necessarily those of the Banco de Portugal. Please address correspondence to

Using recently developed panel unit root and panel cointegration tests and the Fully-Modified OLS (FMOLS) methodology, this paper estimates the impact of remittances on the economic growth of selected upper and lower income Latin American & Caribbean countries. Despite a large flow of remittances to the region, there have been relatively few empirical studies assessing the impact of remittances on growth in Latin American and the Caribbean. Panel unit root tests suggests that several of the macro variables included in the model exhibit unit roots, yet, at the same time, Pedroni’s panel cointegration methodology determined that there is a cointegrating relationship among the variables in the estimated model. Moreover, FMOLS estimates suggest that remittances have a positive and significant effect on economic growth in both groups of countries. The interaction of remittances with a financial development variable revealed that these two variables act as substitutes and, moreover, that the impact of remittances is more pronounced in the presence of the financial development variable.

Ostapik and Mohan Anand provided excellent research assistance. The views expressed in this paper are those of the authors and are not necessarily reflective of views of the Federal Reserve Bank of Philadelphia South Korea’s growth miracle has been well documented. A large set of institutional and policy reforms in the early 1960s is thought to have contributed to the country’s extraordinary performance. In this paper, we assess the importance of one key set of policies, the trade policy reforms in Korea, as well as the concurrent GATT tariff reductions. We develop a model of neoclassical growth and trade that highlights two forces by which lower trade barriers can lead to increased per worker GDP: comparative advantage and specialization, and capital accumulation. We calibrate the model and simulate the effects of three sets of tariff reductions that occurred between the early 1962 and 1995. Our main finding is that the model can explain up to 32 percent of South Korea’s catch-up to the G7 countries in output per worker in the manufacturing sector. We find that the effects of the tariff reductions taken together are about twice as large as the sum of each reduction applied individually.

For centuries, most international trade involved an exchange of complete goods. But, with recent improvements in transportation and communications technology, it increas-ingly entails di¤erent countries adding value to global supply chains, or what might be called trade in tasks.We propose a theory of the global production process that focuses on tradable tasks and use it to study how falling costs of o¤shoring a¤ect factor prices in the source country. We identify a productivity e¤ect of task trade that bene…ts the factor whose tasks are more easily moved o¤shore. In the light of this e¤ect, reductions in the cost of trading tasks can generate shared gains for all domestic factors, in contrast to the distributional conict that typically results from reductions in the cost of trading goods.

In 2011 all ECB publications feature a motif taken from the €100 banknote. NOTE: This Working Paper should not be reported as representing the views of the European Central Bank (ECB). The views expressed are those of the authors and do not necessarily reflect those of the ECB.

P14702, entitled: “Public Finance, Unemployment and Growth”. Thanks are due to Gabriel Felbermayr for very helpful comments on an earlier version. Factor price frontiers with international fragmentation of multistage production by

and are gratefully acknowledged. This research was supported by the SFB 373 of the Deutsche Forschungsgemeinschaft (DFG).

and Denver (ASSA). The views expressed herein are those of the authors and do not necessarily reflect

This paper analyzes the offshoring strategy from an empirical view. It focuses on firm heterogeneity, asset specificity and search costs. On the basis of theoretical models, it extracts a set of testable hypotheses and creates a suitable set of variable to test their validity. This analysis is based on a data set from French manufacturing firms that provides detailed information on the offshoring strategy. The choice of offshoring modes is investigated through the estimation of a multinomial probit model and associated to a set of explanatory variables at the firm, industry and country levels. The results emphasize the role of firm heterogeneity, input specificity and of market thickness.