Abstract not found

We would like to thank the editor, two anonymous referees, Rajeev Dehejia, Gene Grossman, James Harrigan and John McLaren for helpful comments on earlier versions of the manuscript. We also thank seminar participants at the University of Maryland, the University of Virginia and Yale University for helpful comments. Special thanks to David Autor, Robert Feenstra, Wayne Gray, and Lawrence Edwards for providing data critical to our analysis. Excellent research assistance was provided by Catherine Almirall, Revital Bar, Joan Fang, and Michael Freedman. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

We employ data that match the population of Danish workers to the universe of private-sector Danish firms, with product-level trade flows by origin- and destination-countries. We document new stylized facts about offshoring and instrument for offshoring and exporting. Within job spells, offshoring increases (decreases) the high-skilled (low-skilled) wage; exporting increases the wages of all skill-types; the net wage-effect of trade varies substantially within the same skill-type; conditional on skill, the wage-effect of offshoring varies across task characteristics. We estimate the overall effects of offshor-ing on workers ’ present and future income streams by constructing pre- offshoring-shock worker-cohorts and tracking them over time. (JEL F14, F16, J24, J31, L24) A key feature of global trade in the new century is the rapid growth of offshoring (Feenstra and Hanson 2003) and trade in intermediate goods (Hummels, Ishii, and Yi 2001). How has offshoring affected workers ’ wages? The answer to this question is not theoretically obvious. At some level purchasing an input from a foreign source must replace a task previously done by a domestic worker, which would suggest dis-

This article develops an elementary theory of global supply chains. We consider a world economy with an arbitrary number of countries, one factor of production, a continuum of intermediate goods and one final good. Production of the final good is sequential and subject to mistakes. In the unique free trade equilibrium, countries with lower probabilities of making mistakes at all stages specialize in later stages of production. Using this simple theoretical framework, we offer a first look at how vertical specialization shapes the interdependence of nations.

We offer an integrated explanation and empirical analysis of the polarization of U.S. employment and wages between 1980 and 2005, and the concurrent growth of low skill service occupations. We attribute polarization to the interaction between consumer preferences, which favor variety over specialization, and the falling cost of automating routine, codifiable job tasks. Applying a spatial equilibrium model, we derive, test, and confirm four implications of this hypothesis. Local labor markets that were specialized in routine activities differentially adopted information technology, reallocated low skill labor into service occupations (employment polarization), experienced earnings growth at the tails of the distribution (wage polarization), and received inflows of skilled labor.

This paper proposes a Ricardian model to understand the short-run and long-run aggregate effects of increased fragmentation and offshoring on rich and poor countries. The short-run analysis shows that, when offshoring is sufficiently high, further increases in offshoring benefit the poor country and hurt the rich country. But these effects may be reversed in the long run as countries adjust their research efforts in response to increased offshoring. In particular, in the long run, the rich country always gains from increased offshoring, whereas poor countries see their static gains partially eroded by a decline in their research efforts. (JEL F12, F23, L24, M16) Technological change has led to a dramatic decline in the cost of communication and in the cost of coordinating activities performed in different locations. This has allowed firms in rich countries to fragment their production process and offshore an increasing share of the value chain to low-wage countries. 1, 2 Richard Baldwin (2006) refers to this phenomenon as the “second unbundling. ” In his words,

Our paper integrates results from trade-in-task theory into mainstream trade theory by developing trade-in-task analogues to the four famous theorems (Heckscher-Ohlin, factor price equalisation, Stolper-Samuelson, and Rybczynski) and showing the standard gains-from-trade theorem does not hold for trade-in-tasks. We show trade-in-tasks creates intraindustry trade in a Walrasian economy, and derive necessary and sufficient conditions for analyzing the impact of trade-in-tasks on wages and production. Extensions of the integrating framework easily accommodate

We analyze the relationship between offshoring and the onshore workforce composition in German multinational enterprises (MNEs), using plant data that allow us to discern tasks, occupations, and workforce skills. Offshoring is associated with a statistically significant shift towards more non-routine and more interactive tasks, and with a shift towards highly educated workers. The shift towards highly educated workers is in excess of what is implied by changes in either the task or the occupational composition. Offshoring to low-income countries—with the exception of Central and Eastern European countries—is associated with stronger onshore responses. We find offshoring to predict between 10 and 15 percent of observed changes in wage-bill shares of highly educated workers and measures of non-routine and interactive tasks.

This paper explores the links between exports, export destinations and skill utilization by firms. We identify two mechanisms behind these links, which we integrate into a unified theory of export destinations and skills. First, exporting to high-income countries with higher valuation for quality leads to quality upgrades that are skill-intensive (Verhoogen, 2008). Second, exporting in general, and exporting to high-income destinations in particular, requires services such as distribution, transportation, and advertising, activities that are also intensive in skilled labor (Matsuyama, 2007). Both theories suggest a skill-bias in export destinations: firms that export to high-income destinations hire more skills and pay higher wages than firms that export to middle-income countries or that sell domestically. We test the theory using a panel of Argentine manufacturing firms. The data cover the period 1998-2000 and thus span the Brazilian currency devaluation of 1999. We use the exogenous changes in exports and export destinations brought about by this devaluation in a major export partner to identify the causal effect of exporting and of exporting to high-income countries on skill utilization. We find that Argentine firms exporting to high-income countries hired a higher proportion of skilled workers and paid higher average wages than other exporters (to non high-income countries) and domestic firms. Instead, we cannot identify any causal effect of exporting per se on skill utilization.

Abstract: Little progress has been made to date in using the GATS framework to lock-in already implemented unilateral reforms, let alone in inducing new liberalization. A number of potential explanations for this limited performance are identified and assessed. These include limited feasibility of using the reciprocity mechanism to mobilize domestic export interests; difficulties of enforcing commitments; weaknesses in domestic (complementary) regulatory capacity; uncertainty regarding the magnitude and distribution of costs and benefits of policy reforms; and a preference for bilateral or regional cooperation. All these factors play a role in reducing the ability of the GATS to be an effective instrument to internalize terms of trade externalities and to act as a credible commitment device for policy reform. Changes in negotiating and enforcement modalities could help strengthen the relevance of the GATS as an instrument of multilateral cooperation.