Search

We develop a multi-country, multi-sector trade model with labor market frictions and equilibrium unemployment. Trade opening leads to a reduction in unemployment if it raises real wages and reallocates labor towards sectors with lower-than-average labor market frictions. We estimate sector-specific labor market frictions and trade elasticities using employment data from 25 OECD countries and worldwide trade data. We then quantify the potential unemployment and real wage effects of implementing the Transatlantic Trade and Investment Partnership (TTIP) or the Trans-Pacific Partnership (TPP), and of eliminating trade imbalances worldwide. The unemployment and real wage effects work in conflicting directions for some countries under some trade regimes, such as the US under TTIP. We introduce a welfare criterion that accounts for both effects and splits such ties. Accordingly, US welfare is predicted to decrease under TTIP and increase under TPP.

The paper presents a model of an economy whose urban structure consists of cities of different types. All cities of different types. All cities produce a non-tradeable final good using both types of tradeable intermediate varieties. Each city has an internal spatial structure: individuals commute to the CBD in order to work, when employed, and to seek jobs, when unemployed. Hiring by each intermediate producing firm is subject to frictions, which are modeled in the Diamond-Mortensen-Pissarides fashion. Job matching requires either travel to the CBD for face to face contacts or, alternatively, referrals from social contacts.City type is conferred by specialization in producing one of the two types of intermediate varieties, diversified cities, where both types are produced, and there is intercity trade in intermediate varieties. The paper examines the properties of equilibrium with intercity trade and its dependence on such parameters as those pertaining to productivity, the matching process, the rate of job destruction and their consequences for unemployment, output and welfare across the economy along a steady state. The model's use of international trade tools confers a central role to labor market tightness, akin to factor intensity. A natural dependence of unemployment on city size is generated. The paper provides a framework for studying spatial mismatch. Equilibrium outcomes generically diverge from the planner's optimum: socially optimal unemployment trades off the probability of employment to search socts of firms independently for each skill type and independently of city size, and city sizes are independent of labor market tightness considerations but reflect both market size effects and the skill composition of the economy.

We estimate foreign ownership wage premiums for every 3-digit manufacturing industry in China and discover a wide range of premiums both for so-called "foreign" ownership and for overseas Chinese ownership of firms. Foreign ownership generates larger and more prevalent wage premiums than overseas Chinese ownership of firms, but both types of foreign ownership produce wage premiums that respond similarly in hypothesis testing of determinants. Using the number of computers per worker as an indicator of a firm’s technology level, we find support in 76-78% of industries for the hypothesis that foreign firms pay higher wages to reduce the risk of worker turnover and the accompanying technology leakage to domestic rivals. However, this determinant explains only 5-6% of the foreign wage premium, on average. We find the most intensive support for the "fair wage" hypothesis that foreign firms pay higher wages because they are more profitable than domestic firms and workers in more profitable firms expect to be paid more, otherwise they will shirk. This hypothesis explains an average of 8-9% of the foreign wage premiums, with support for the hypothesis found in 72-75% of the industries using firm’s total profits per worker as the added wage determinant. Intangible assets and training costs were found to be much weaker individual determinants of foreign wage premiums. When we consider the best combination of explanatory variables to include in each industry’s wage regression, we find support for our combined hypotheses in the vast majority of industries, but we still find large residual wage premiums attached to foreign ownership in China.

Selling internationally requires products that resonate with an international customer base and therefore an approach to markets that is in keeping with diverse cultures (i.e., relational capital). As emphasized by international business studies, this relational capital is in turn related to the successful teaming of a diverse workforce, as this process teaches employees to operate in multicultural environments. This knowledge becomes like an intangible asset to which firms can resort, also when engaging in international transactions. We explore this channel empirically, investigating the impact of workforce diversity on firms' exporting performances and find that ethnic diversity further justifies firms' different presence in international markets. Since hiring is not a random practice, and firms ultimately select into ethnically different labor forces, we exploit the EU enlargement of 2004 to instrument for the diversity of the pool of workers locally recruitable. Because migrants tend to settle where the attitude toward them is most favorable, we use the median voter's political ideology at firm's location to measure the hostility at time of settlement. This gives our instrument spatial variation besides time variation.

A recent boom in commodities-for-manufactures trade between China and other developing countries has led to much concern about the losers from rising import competition in manufacturing, but little attention on the winners from growing Chinese demand for commodities. Using census data for Brazil, we find that local labour markets more affected by Chinese import competition experienced slower growth in manufacturing wages and in-migration rates between 2000 and 2010, and greater rises in local wage inequality. However, in locations benefiting from rising Chinese demand, we observe higher wage growth, lower takeup of cash transfers and positive effects on job quality.

We analyze changes in the skill content of occupations in US four-digit manufacturing industries between 1999 and 2010. Following a >task-based> approach, we elaborate a measure of non-routine skill intensity that captures the effects of industry exposure to both technology and international trade. The article adds to previous literature by focusing on both the determinants of demand for non-routine skills and their effects on industry productivity and wages. The key finding is that import competition from low-wage countries has been a strong driver of demand for non-routine skills during the 2000s. Both technology and trade with low-wage countries are associated with mild cross-industry convergence in skill intensity, while trade with high- and medium-wage countries are at the root of persistent heterogeneity across occupational groups. We also find that higher non-routine skill intensity has had, at best, a modest effect on productivity and wages, except in high-skill occupations., D.C. acknowledges the financial support of the Spanish Ministerio de Economia y Competitividad (RYC-2011-07888).

The consumption of imported goods is thought to influence consumers’ views and attitudes toward export countries. It is important to consider this issue, especially when there is political tension and conflict between countries. Because of their historical background, political conflict exists between Korea and Japan. This paper examines the effect of viewing Japanese anime (animation) on the attitudes of Koreans toward Japanese living in Korea. The major findings of the study show that the more frequently adult Koreans view Japanese anime, the more likely they are to accept Japanese as workplace colleagues and neighbors after controlling for endogeneity bias using instrumental variables. The findings of this paper imply that via the consumption of imported cultural goods, people are exposed to positive traits of the trading partner, and thus consumers have a stronger affinity with the export country. From this, we derive the policy implication that promoting the trade of modern cultural goods is effective in increasing mutual understanding between trading partners, thereby reducing political tension between them.

Our objective in this paper is threefold. First, to identify the major common shocks that hit these countries upon entry into the EMU. Second, taking Greece as our case study, to construct a simple macroeconomic model of the policies Greek governments pursued in the presence of these shocks, and to employ its solution so as to highlight the outcomes that were expected to result. From this endeavor, we find that the policies which were put in place led unavoidably to a severe economic crisis and eventual bankruptcy. Finally, in view of these findings and what happened in 2009,we raise and attempt to answer questions like, for example: How can we explain the policies that were adopted in the advent of monetary union shocks? Could they have been anticipated? And if so, why did they escape the attention of the designers of the Maastricht Treaty? The answer to which we are led by the analysis is that the shocks in all these countries were perceived by their governments as opportunities to hold on to their entrenched positions. That this happened, we conclude, reflects a failure in the mechanisms of economic convergence that were embedded in the Maastricht Treaty as well as in the effectiveness of European Union (EU) institutions that were empowered with their enforcement.

A competitive search model of the labor market is embedded into a small open economy with firm and worker heterogeneity. Search frictions generate equilibrium unemployment and income inequality between identical workers, in addition to income differences between skill groups. Numerical simulations of the model reveal that an increase in trade is likely to increase within-group inequality and decrease unemployment, while the effect on the skill premium is ambiguous. Overall the effect of trade on the labor market is minor if only a small fraction of the labor force is employed in exporting and import-competing industries.

We investigate the role that labor costs hold in exporters’ performance. To do so, we exploit a large-scale French reform that granted most firms a tax credit proportional to the wagebill of their employees paid below a given threshold. This policy effectively translated into a cut in labor cost whose magnitude varies depending on firm-specific wage structures. We use the predicted treatment intensity based on pre-reform composition of the labor force as an instrument for the actual policy-induced firm-level change in labor costs. Although our point estimates are consistent with commonly estimated firm-level trade elasticities combined with reasonable labor shares in total costs, coefficients are found to be very noisy, suggesting lack of robust evidence of a causal effect of the policy. We discuss several potential explanations for our results as well as their implications.

We study the effects of explosive growth in the Bangladeshi ready-made garments industry on the lives on Bangladeshi women. We compare the marriage, childbearing, school enrollment and employment decisions of women who gain greater access to garment sector jobs to women living further away from factories, to years before the factories arrive close to some villages, and to the marriage and enrollment decisions of their male siblings. Girls exposed to the garment sector delay marriage and childbirth. This stems from (a) young girls becoming more likely to be enrolled in school after garment jobs (which reward literacy and numeracy) arrive, and (b) older girls becoming more likely to be employed outside the home in garment-proximate villages. The demand for education generated through manufacturing growth appears to have a much larger effect on female educational attainment compared to a large-scale government conditional cash transfer program to encourage female schooling.

Trade economists have long studied the effects of globalization on wage differences between workers with different levels of skill or education. 1 This literature has generally sought to link globalization to changes in the economy-wide skill premium. Attanasio, Goldberg, and Pavcnik (2004) and Gonzaga, Menezes Filho, and Terra (2006) are salient examples that investigate whether changes in sector-specific prices or tariffs, changes in skill composition within and across sectors, and movements in the skill premium are consistent with the predictions of workhorse trade models, such as the HeckscherOhlin model. However, there is little evidence directly establishing a causal effect of globalization on the skill premium. 2 More recently, a growing body of research has focused on trade’s differential effects across local markets within a country. 3 In this paper, we combine these two strands of literature by developing a theoretically consistent approach to studying the causal

The international movement of economic factors such as capital and skilled labor has complex effects on the economies involved, especially when multiple factors move at the same time. One important effect is the potential change in wage inequality between skilled and unskilled labor—particularly, in developing countries that have agreed to trade with developed countries. This study considers a small open economy with two goods and three factors to determine whether wage inequality increases or decreases due to increased movement of these factors. The key findings are that wage inequality can unambiguously increase and decrease, under certain circumstances regarding the capital intensity of the sector(s), the initial amount of foreign factors, and the shares of factors in national income.

We analyze how a set of traditional as well as new determinants affect trade among European countries over the period 1992–2008. The factors encompass variables from the areas of geography, culture, institutions, infrastructure, and trade direction. Trade is analyzed for three types of goods: primary goods, parts and components, and capital goods. For each type of good we also distinguish its definiti on in terms of flows, intensive margin, and extensive margin. Methodologically we first derive country-pair fixed effects over all possible pairs of export-import partners, and in the second stage we relate fixed effects with a set of influential factors. We show (i) the intuitive and varying effects of geographical, cultural, and institutional factors, (ii) the beneficial effects of soft and hard infrastructure, and (iii) the key importance of the trade between old and new EU members.

This paper develops a revealed preference methodology for exploring whether time inconsistencies in household choice are the product of nonstationarities at the individual level or the result of individual heterogeneity and renegotiation within the collective unit. An empirical application to household-level microdata highlights that an explicit recognition of the collective nature of choice allows the vast majority of household behaviour to be rationalised by theory that assumes preference stationarity at the individual level. For our particular short panel data set, simply permitting limited intrahousehold heterogeneity in time preferences allows the choices of 98.4% of the sample to be rationalised by a model that assumes exponential discounting at the individual level. We also find that couples characterized by lower divergence in spousal discount rates are older, more likely to have children and wealthier, which we take as indications of experiencing higher match quality.

In this paper, we use a linked employer–employee database from Brazil to evaluate the wage effects of trade reform. With an aggregate (firm-level) analysis of this question, we find that a decline in trade protection is associated with an increase in average wages in exporting firms relative to domestic firms, consistent with earlier studies. However, using disaggregated, employer–employee level data, and allowing for the endogenous assignment of workers to firms due to match-specific productivity, we find that the premium paid to workers at exporting firms is economically and statistically insignificant, as is the differential impact of trade openness on the wages of workers at exporting firms relative to otherwise identical workers at domestic firms. We also find that workforce composition improves systematically in exporting firms, in terms of the combination of worker ability and the quality of worker–firm matches, post-liberalization. These results stand in stark contrast to the findings reported in many earlier studies and underscore the importance of endogenous matching and, more generally, non-random labor market allocation mechanisms, in determining the effects of trade policy changes on wages.

We develop an open economy general equilibrium model, with auction-based directed search unemployment, to study the interactions of trade and unemployment. The theory ascribes all outcomes purely to the fundamentals of technology and endowment. If countries differ by endowment, trade makes both the unemployment rate and the rental in the capital-(labour-) abundant country rise (decline) but does not lead to equalization. If, alternatively, countries differ by technology, trade increases (decreases) the unemployment rate in the country whose technology is relatively superior (inferior) for producing the capital-intensive good.

In this paper, we link industry-level data on offshoring activities of U.S. multinational firms, import penetration, and export shares with individual level worker data from the Current Population Surveys. We examine whether increasing globalization through offshoring or trade has led to reallocation of labor, both within and out of manufacturing, and measure its impact on the wages of domestic workers. We also control for the "routineness" of individual occupations. Our results suggest that (1) offshoring to high wage countries is positively correlated with U.S. manufacturing employment (2) offshoring to low wage countries is associated with U.S. employment declines (3) wages for workers who remain in manufacturing are generally positively affected by offshoring; in particular, we find that wages are positively associated with an increase in U.S. multinational employment in high income locations (4) much of the negative effects of globalization operate through downward pressure on wages of workers who leave manufacturing to take jobs in agriculture or services and (5) the downward pressure on aggregate U.S. wages operating through import competition has been quite important for some occupations. This effect has been overlooked because it operates across, not within, industries.

This paper challenges the conventional academic view that international outsourcing is just another form of gainful trade. Contrary to that view, we show that labour-service outsourcing can reduce the high-wage country's welfare even when product-market trade is beneficial, within a model that combines involuntary unemployment and monopolistic competition. Outsourcing's impact on welfare is worsened by a definite loss of jobs and a possible contraction in the range of varieties produced worldwide. While owners of capital benefit from outsourcing under certain conditions, labour's welfare always falls. Resume Consequences de la sous-traitance internationale sur le chomage et le bien-etre en regime de concurrence monopolistique. Ce texte remet en question le point de vue conventionnel des universitaires pour qui la sous-traitance internationale n'est qu'une autre forme de commerce porteur de gains. En opposition a ce point de vue, on montre que la sous-traitance de services de travail peut reduire le niveau de bien-etre du pays a hauts salaires meme quand le commerce dans le marche des produits est benefique – dans un modele qui combine chomage involontaire et concurrence monopolistique. L'impact de la sous-traitance sur bien-etre est rempire par une perte d'emplois et une contraction possible de la variete de produits au plan mondial. Alors que les proprietaires de capital beneficient de la sous-traitance dans certaines conditions, le bien-etre du travail decline toujours.

A growing body of research examines the regional effects of trade liberalization using a weighted average of trade policy changes across industries. This paper develops a specific-factors model of regional economies that provides a theoretical foundation for this intuitively appealing empirical approach and also provides guidance on treatment of the nontraded sector. In the context of Brazil's early 1990s trade liberalization, I find that regions facing a 10 percentage point larger liberalization-induced price decline experienced a 4 percentage point larger wage decline. The results also confirm the empirical relevance of appropriately dealing with the nontraded sector. (JEL F13, F16, O19, O24)

We investigate to what extent worker heterogeneity explains the well-known wage and productivity exporter premiums, employing a matched employer-employee data set for Norwegian manufacturing. The wage premium falls by roughly 50% after controlling for observed and unobserved worker characteristics, while the total factor productivity premium falls by 25% to 40%, suggesting that sorting explains up to half of these premiums. Recent trade models emphasize the role of within-industry reallocation of labor in response to various shocks to the economy. Our findings suggest that aggregate productivity gains due to reallocation may be overstated if not controlling for sorting between firms and workers. © 2013 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Summary The last decade has been shaped by dramatic developments in international trade, international investment and production, both in terms of the scale of events and in terms of their qualitative nature. Intriguing questions have been thrown up concerning the labor market impact of these developments, notably welfare issues (the evolution of real wages, employment and unemployment), the distribution of income (the wage structure) and employment volatility. Path-breaking innovations in the theories of trade, location and the multinational firm allow a fresh look at these labor market effects. This paper takes stock of these theoretical innovations and contrasts these with the recent empirical research efforts to uncover the labor market implications of trade and FDI. We identify research gaps and highlight promising avenues for future research.

How does trade liberalization affect unemployment across locations within the U.S.? Using direct administrative evidence on trade-induced job displacements, this paper first documents that locations experiencing more foreign competition not only have higher job destruction rates but also lower job creation rates and thereby lower employment rates. Aggregate import penetration proxies based on industrial composition do not explain these uneven labor market outcomes, highlighting within-industry heterogeneity. In a heterogeneous firms trade model with both head-to-head competition and segmented labor markets, foreign competition has an endogenous correlated effect on job destruction and job creation because the most vulnerable locations are also the least productive. Competitive effects of trade on the entire distribution of variable markups underpin the unequal labor market effects of trade liberalization. In the transition following an unexpected trade liberalization, employment and earnings collapse in the worst hit locations while welfare, inequality, and employment increase in the aggregate.

Labor turnover is a commonly cited mechanism for the transmission of technology from multinational to domestic firms. Using a matched establishment-worker database from Brazil, I present evidence consistent with positive multinational wage spillovers through worker mobility. When workers leave multinationals and are rehired at domestic establishments, continuing-workers' wages increase. To my knowledge, this avenue for wage spillovers has not previously been explored. The paper also investigates where spillovers occur and how they are absorbed to demonstrate heterogeneous impacts. Higher-skilled former multinational workers are better able to transfer information, and higher-skilled incumbent domestic workers are better able to absorb information. © 2013 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

We introduce search and matching unemployment into a model of trade with differentiated goods and heterogeneous firms. Countries may differ with respect to size, geographical location, and labor market institutions. Contrary to the literature, our single-sector perspective pays special attention to the role of income effects and shows that bad institutions in one country worsen labor market outcomes not only in that country but also in its trading partners. This spill-over effect is conditioned by trade costs and country size: smaller and/or more centrally located nations suffer less from inefficient policies at home and are more heavily affected from spill-overs abroad than larger and/or peripheral ones. We offer empirical evidence for a panel of 20 rich OECD countries. Carefully controlling for institutional features and for business cycle comovements between countries, we confirm our qualitative theoretical predictions. However, the magnitude of spill-over effects is larger in the data than in the theoretical model. We show that introducing real wage rigidity can remedy this problem.

Abstract: Fairness considerations are introduced into the determination of wages in a two factor Pissarides-style model of search unemployment to study its implications for the unemployment rates of unskilled and skilled workers in both the closed economy case and when the economy can offshore some inputs. Both fairness concerns and offshoring of jobs done by unskilled workers create the overhiring effect for skilled workers. An increase in the concern for fairness in the closed economy increases the cost of hiring unskilled workers and increases the unemployment rates of both types of workers; however, wage inequality decreases. In the open economy case, an increase in the concern for fairness leads to greater offshoring which prevents skilled unemployment from increasing, but the unemployment of unskilled workers increases. A reduction in the cost of offshoring also increases offshoring and increases the unemployment of unskilled workers, but has a positive effect on skilled workers. Due to the presence of an overhiring effect in the hiring of skilled workers for both offshoring and non-offshoring firms, skilled workers experience higher wages and lower unemployment. The opposite movements in skilled and unskilled unemployment render the net effect ambiguous. Even though wage inequality increases, the impact on the wages of unskilled workers is ambiguous.

In the spirit of Hanson (Econ J 107:113–133, 1997), we analyse, first, the existence of a relationship between the wage level and the market potential of Spanish regions; second, we explore the relative importance of domestic and foreign markets in this relationship; and finally, we examine the existence of a regional nominal wage gradient in Spain during the interwar period (1914–1930) centred on the main industrial cluster, Barcelona, and its transformation following the increase in protectionism in the Spanish economy as well as in the international economy. As suggested by NEG literature, our results support the hypothesis of a relationship between wages and regional market access and show the change in the regional wage structure following the gradual closing of the Spanish economy and of Spain’s trade partners, as a result of the increasing importance of the domestic market. We find evidence of the existence of a regional wage gradient centred on Barcelona which weakened during these years. Therefore, in Spain, during the interwar period, protectionist policies appear to have favoured the loss of centrality of a border region (Barcelona) and the relative rise of other locations.

This paper explores the impact of immigrants on the imports, exports and productivity of service-producing firms in the U.K. Immigrants may substitute for imported intermediate inputs (offshore production) and they may impact the productivity of the firm as well as its export behavior. The first effect can be understood as the re-assignment of offshore productive tasks to immigrant workers. The second can be seen as a productivity or cost cutting effect due to immigration, and the third as the effect of immigrants on specific bilateral trade costs. We test the predictions of our model using differences in immigrant inflows across U.K. labor markets, instrumented with an enclave-based instrument that distinguishes between aggregate and bilateral immigration, as well as immigrant diversity. We find that immigrants increase overall productivity in service-producing firms, revealing a cost cutting impact on these firms. Immigrants also reduce the extent of country-specific offshoring, consistent with a reallocation of tasks and, finally, they increase country-specific exports, implying an important role in reducing communication and trade costs for services.

Is skill dispersion a source of comparative advantage? While it is established that a country's aggregate endowment of human capital is an important determinant of comparative advantage, this paper investigates whether the distribution of skills in the labor force can play a role in the determination of trade ‡ows. We develop a multi-country, multi-sector model of trade in which comparative advantage derives from (i) dierences across sectors in the complementarity of workers' skills, (ii) the dispersion of skills in the working population. We …rst illustrate how higher dispersion in human capital can trigger specialization in sectors characterized by higher substitutability among workers'skills. Then we use industry-level bilateral trade data to show that human capital dispersion, as measured by a standard international metric, has a signi…cant eect on trade ‡ows. We …nd that the eect is of a magnitude comparable to that of aggregate endowments, as measured in the literature. The result is robust to the introduction of controls for several causes of comparative advantage, as well as to alternative measures of skill complementarity.

This paper estimates the effects of outward Foreign Direct Investment (employment in affiliates abroad) on employment, wages and the wage share in Austria using panel data for the period 1996–2005. There is evidence of significant negative effects of FDI on both employment and wages, and consequently on the wage share. The results are not limited to workers in low-skilled sectors. The negative employment effect is mainly due to the rise in employment in the foreign affiliates in Eastern Europe. The negative wage effects originate from affiliate employment in both Eastern Europe and the developed countries in the industrial sector, but FDI in Eastern Europe has positive wage effects in the services sector due to possible scope effects.

In order to answer the pertinent question why developing countries are showing penchant for foreign capital over the last two decades in spite of its detrimental effects as revealed from the conventional two-sector mobile capital version of Harris–Todaro (HT) model in the presence of protectionist policy; this paper, in terms of a three-sector HT type general equilibrium model with agricultural dualism where advanced agricultural sector produces a non-traded intermediate input using capital apart from labour and land for the agro-based industry in the urban sector, tries to show that foreign capital inflow may not only improve social welfare, but also lower the magnitude of urban unemployment of labour or may lead to the phenomenon of ‘jobless growth’.

Dieser Beitrag prasentiert ein theoretisches Modell, welches die Wirkung von Handelsliberalisierung und technologischem Fortschritt auf Arbeitsmarkten zweier Lander beschreibt. Dabei werden heterogene Firmen und Sucharbeitslosigkeit unterstellt. Unterschiedliche Wirtschaftssektoren und Produktionsfaktoren gewahrleisten komparative Kostenvorteile und die Analyse von Handels- und Technologiewirkungen innerhalb und zwischen den Wirtschaftssektoren auf hoch und niedrig qualifizierte Arbeitnehmer. Technologischer Fortschritt und intersektoraler Handel fuhren zu dem Verteilungseffekt, dass hoch qualifizierte gegenuber niedrig qualifizierten Arbeitnehmern begunstigt werden. Intrasektoraler Handel wirkt dem entgegen, da hierdurch auch die Nachfrage nach niedrig qualifizierten Arbeitnehmern steigt. Insgesamt hangen die Lohn- und Beschaftigungseffekte auf hoch und niedrig Qualifizierte vom Ausmas technologischen Fortschritts, inter- und intrasektoralem Handel ab.

For three years after the typical emerging economy opens its stock market to inflows of foreign capital, the average annual growth rate of the real wage in the manufacturing sector increases by a factor of three. No such increase occurs in a control group of countries that do not liberalize. The temporary increase in wage growth drives up the level of the average worker’s annual compensation by US $487—an increase equal to nearly one-fifth of their annual pre-liberalization salary. Overall, the results suggest that trade in capital may have a larger impact on wages than trade in goods. (JEL E25, E44, F16, F43, G18, O16) T he impact of trade on wages occupies a salient space in the collective imagination of the economics profession. When a country opens up to trade with the rest of the world, income shifts away from that country’s scarce factor of production and toward the one that is abundant (Stolper and Samuelson 1941). Inspired by the celebrated Stolper-Samuelson Theorem, economics journals abound with articles examining the extent to which trade induces factor price equalization. The evidence so far is mixed. The consensus view suggests that trade with developing countries is, at best, a modest force behind the large decline in the relative wages of low-skilled workers in rich countries ( Krugman 1995; Lawrence and Slaughter 1993; Cline 1997; Lawrence 2008) . 1 In the case of workers in developing countries, the evidence actually runs contrary to the theory. Whereas Stolper-Samuelson predicts that trade with rich countries will increase the relative wages of low-skilled workers in poor countries, trade liberalization during the 1980s and 1990s actually increased wage inequality in the developing world ( Goldberg and Pavcnik 2007).

In many developing countries, increasing international integration has been accompanied by rising wage inequality, and traditional Heckscher-Ohlin models, which rely on between-sector reallocations to link trade and labor-market outcomes, are difficult to reconcile with this pattern (Goldberg and Pavcnik 2007). Recently, researchers have proposed a number of potential within-sector explanations based on the behavior of heterogeneous firms, involving technology choice, quality upgrading, search and bargaining, or fair wages, among other mechanisms. There is evidence at the plant level to support a within-sector link between trade and inequality. For instance, Verhoogen (2008) finds that initially larger, higher-productivity Mexican plants had higher export propensity and wages in cross-section in 1993 and that they were more likely to increase exports and wages in response to the late-1994 devaluation of the peso. The shock to exporting thus arguably increased dispersion in wages between plants within sectors. At the plant level, however, many of the proposed within-sector mechanisms carry similar observable implications. Distinguishing among the various mechanisms will require moving to a lower level of disaggregation, and exploiting information at the level of individual workers within plants. In this short article and the longer article to which it is a companion (Frías, Kaplan, and Verhoogen 2011), we use employer-employee data from Mexico and an identification strategy from Verhoogen (2008) to examine the effects of exporting on wage outcomes that are not available in standard plant-level datasets. In Frías, Kaplan, and Verhoogen (2011), we estimate the effect of exporting on wage premia, defined as wages above what individual workers would expect to earn elsewhere in the labor market. Wage premia are estimated as plant effects, controlling flexibly for individual heterogeneity (and allowing the return to worker ability to vary over time), implicitly assuming that the plant effect is the same for all employed workers. In this short article, by contrast, we do not attempt to control for worker heterogeneity, but instead focus on the effect of exporting on the shape of within-plant wage distributions. As we show in more detail below, we find that exporting has little effect on wages at the low end of the wage spectrum within plants, and that it raises within-plant wage dispersion, but not uniformly between all quantiles. The results are consistent with, but add important qualifications to, the finding of Verhoogen (2008) in plant-level data that exporting raised the ratio of white-collar to blue-collar average wages. This article is related to an active theory literature on trade, matching, and organizations which has proposed a variety of mechanisms linking trade and wage distributions within firms. Recent papers using employer-employee data to investigate the consequences of trade for labor-market outcomes (without focusing on the overall within-plant distributions) include Krishna, Poole, and Senses (2011); Hummels et al. (2011); and Davidson et al. (2011); see Frías, Kaplan, and Verhoogen (2011) for a fuller literature review.

This article presents an economic geography model with two differentiated sectors that exhibit weaker inter and stronger intra-industry input-output linkages. Labour is also differentiated according to skills in a hierarchy of tasks they can perform. Globalisation occurs in two distinct phases, leading to the agglomeration of an industry (manufacturing) in the first wave, which is subsequently displaced by the other industry (services) when the second wave of globalisation takes place. Because of agglomeration effects, the increase in relative endowment of a factor may increase its relative wages, leading to more inequality. Within and between nations inequality can result.

This paper studies the impact of migration policy liberalisation on international labour migration in the enlarged European Union (EU) in a structural economic geography approach. The liberalisation of migration policy would induce an additional 1.80–2.98% of the total EU workforce to change their country of location, with most of migrant workers relocating from the East to the West. The average net migration rate is decreasing in the level of integration, suggesting that from an economic point of view no regulatory policy responses are necessary to labour migration in the enlarged EU.

Globalization threatens "good jobs at good wages", according to overwhelming public sentiment. Yet professional discussion often rules out such concerns a priori. We instead offer a framework to interpret and address these concerns. We develop a model in which monopolistically competitive firms pay efficiency wages, and these firms differ in both their technical capability and their monitoring ability. Heterogeneity in the ability of firms to monitor effort leads to different wages for identical workers - good jobs and bad jobs - as well as equilibrium unemployment. Wage heterogeneity combines with differences in technical capability to generate an equilibrium size distribution of firms. As in Melitz (2003), trade liberalization increases aggregate efficiency through a firm selection effect. This efficiency-enhancing selection effect, however, puts pressure on many "good jobs", in the sense that the high-wage jobs at any level of technical capability are the least likely to survive trade liberalization. In a central case, trade raises the average real wage but leads to a loss of many "good jobs" and to a steady-state increase in unemployment.

Wage ratios between different percentiles of the wage distribution have moved in parallel and then diverged in the U.S. in the last 50 years. In this paper, I study the theoretical response of wage ratios to skill-biased technical change and trade integration. I build a simple model of heterogeneous technology and heterogeneous workers that features complementarities between the quality of ideas and abilities. I show that changes to the skill bias of technology and to trade costs can both reproduce the observed pattern since (i) they have similar asymmetric effects on productive vs. unproductive firms, and (ii) positive assortative matching in the labor market transmits this asymmetry across high and low skill workers. Focusing on the different channels through which skill-biased technical change and trade integration operate suggests ways to disentangle the magnitude of each.

1. INTRODUCTION For over 30 years, the U.S. Trade Adjustment Assistance (TAA) program has provided workers who can show that they have lost their jobs due to increased imports with income support, training, job search, and relocation benefits. The United States spent $855.1 million to assist approximately 150,000 TAA beneficiaries in 2007. This amount is expected to increase dramatically in the future as the program was significantly expanded by the American Recovery and Reinvestment Act of 2009. The TAA program receives a great deal of support from policy makers; one of the unstated goals of the program is to decrease political resistance to new trade liberalization efforts and Congress has approved additional funding for the TAA program with virtually every new free trade agreement that has been implemented since the program's inception.(1) There is little evidence, however, regarding whether workers have actually been helped by the TAA program. On the contrary, in 2007 the Office of Management and Budget (OMB) rated the program "ineffective" because it failed to demonstrate the cost effectiveness of achieving its goals. The Department of Labor reports simple statistics that measure, for example, the percentage of beneficiaries who are able to find employment following their participation in the TAA program. Statistics such as these fail to take into account the fact that these participants may have found the same employment absent participation in the TAA program. The more appropriate measure of a program's effectiveness is to what extent the program changed the employment outcome of TAA participants. This paper provides an in-depth statistical evaluation of the effectiveness of the TAA program. Summary statistics suggest that the TAA program successfully targets displaced workers who have greater difficulty finding new employment, but we find no statistical evidence that the TAA program actually improves the employment outcomes of beneficiaries. We do find strong evidence, however, suggesting that those workers who participate in TAA-funded training opportunities are more likely to obtain reemployment, and at higher wages, when compared to TAA beneficiaries who do not participate in training. The results suggest that policy makers should require that the TAA program undergoes a comprehensive evaluation as to how it can more effectively assist displaced workers. II. THE TRADE ADJUSTMENT ASSISTANCE PROGRAM The U.S. TAA program, first developed in 1962 and amended repeatedly since that time, compensates workers harmed by increased import competition. (2) The goals of the program are threefold: encourage the rapid reemployment of participants; provide training and income support to allow participants to achieve reemployment; and assist participants to obtain reemployment in fields where they are "likely to remain employed and earn wages comparable to their prior jobs." (3) To be eligible for the TAA program, a company affiliate must file a petition with the Department of Labor alleging that workers in the firm lost their jobs (or suffered a reduction in hours and/or wages) as a result of increased imports or shifts in production outside of the United States. (4,5) The Department of Labor must then decide whether the firm is eligible for the program under current guidelines. Once a firm is certified, any worker from the firm laid off up to I year before or 2 years after the petition was filed is eligible for TAA benefits. TAA benefits fall into five categories: training, income support, relocation allowances, job search allowances, and a health coverage tax credit. (6) Specifically, the TAA program will pay for up to 104 weeks of any basic training program, or up to 130 weeks if the worker is in need of remedial education. Participants are eligible for an additional 26 weeks of unemployment insurance, known as the Trade Readjustment Allowance (TRA). …

50 páginas, 5 figuras, 3 tablas.-- El pdf del artículo es el documento de trabajo., We introduce search unemployment into Melitz's trade model. Firms' monopoly power on product markets leads to strategic wage bargaining. Solving for the symmetric equilibrium we show that the selection effect of trade influences labor market outcomes. Trade liberalization lowers unemployment and raises real wages as long as it improves average productivity. We show that this condition is likely to be met by a reduction in variable trade costs or by entry of new trading countries. Calibrating the model shows that the long-run impact of trade openness on the rate of unemployment is negative and quantitatively significant.

The authors examine the impact of globalization on the domestic labor market for low-skilled workers. Whereas existing research typically focuses on the effects on labor market outcomes such as wages and employment, the authors of this paper examine whether American workers respond to globalization by increasing their investment in human capital. Using both Census data and the Integrated Postsecondary Education Data System (IPEDS) for the period 2000–2007, they measure the extent to which offshoring and immigration affect enrollment at institutions of higher education. Results indicate that both offshoring and immigration increase enrollment at community colleges but not other types of institutions, particularly among older, non-traditional age students. The authors conclude that U.S. workers are indeed responding to globalization by acquiring the skills necessary to compete in a global economy.

We study the effect of globalization on the volatility of wages and worker welfare in a model in which risk is allocated through long-run employment relationships (the ‘invisible handshake’). Globalization can take two forms: international integration of commodity markets (i.e., free trade) and international integration of factor markets (i.e., offshoring). In a two-country, two-good, two-factor model we show that free trade and offshoring have opposite effects on rich-country workers. Free trade hurts rich-country workers, while reducing the volatility of their wages; by contrast, offshoring benefits them, while raising the volatility of their wages. We thus formalize, but also sharply circumscribe, a common critique of globalization.

We revisit the Heckscher-Ohlin-Samuelson model in the presence of labour market frictions a la Mortensen-Pissarides. Relaxing the assumption of the one-worker- one-firm matching rule, we show that the Stolper-Samuelson theorem and the Rybczynski theorem may not hold in specific circumstances. We also demonstrate that the Factor Price Equalization theorem is valid only for capital and unemployed labour across countries, but not for employed labour. In equilibrium, trade patterns are determined by countries' factor endowments and relative factor intensities in sectors (independent of factor intensities in production). Finally, our results suggest an additional explanation for the 'missing trade' phenomenon. JEL classification: F 16, J64

The present paper uses a three-sector general equilibrium framework to examine the effect of Foreign Direct Investment (FDI) on unemployment and welfare in laboursurplus economies in the post-globalisation era. We show that the expansion of landhungry export-oriented agricultural sector through FDI accentuates the problem of urban unemployment in the presence of sticky urban wage and agricultural dualism. We also note that multiple cross-effects and factor specificity play an important role in determining change in output composition and welfare in the wake of the inflow of foreign capital. JEL classification: F16, F21 Keywords: Agricultural Dualism, FDI, Unemployment, Welfare

A new gender wage gap decomposition methodology is introduced, which does not suffer from identification problems caused by unobserved nondiscriminatory wage structure. The methodology is used to measure the relative size of Korean gender wage gaps, from 1994 to 2000 across industries, differentiated by industrial knowledge intensity, where knowledge intensity is the extent to which industries produce or employ high-technology products. Korea represents an important case study, since it possesses one of the fastest growing knowledge-intensive economies among industrialized countries. Empirical results indicate that over this period, discrimination (the unexplained portion of the gender wage gaps) in Korea was statistically smaller in knowledge-intensive industries than in industries with low knowledge intensity. Also, discrimination was declining on average over the period. This suggests that continued growth in knowledge-intensive industries in Korea may lead to further declines in the overall gender gap.

This paper presents an endogenous product cycle overlapping generations model, where the supply of skilled labour is endogenously determined. This is used to examine how production shifts through imitation by developing countries affect the do mestic wage differential and supply of skilled labour in developed countries. In the model, production shifts increase the demand for researchers in developed countries and cause higher relative wages for skilled labour: this leads to more individuals acquiring the skills. As a consequence, the model helps to explain the simultaneous increase in the domes tic wage gap and in the supply of skilled labour observed in developed countries. JEL classification: F16, J31

This paper analyses trade in an asymmetric 2 × 2 × 2 world, where the two countries (‘Europe’ and ‘America’) differ in their preferences towards wage inequality. Fair wage considerations compress wage differentials in both countries. European workers are more averse to wage inequality, and Europe is characterized by lower wage differentials and higher unemployment. Allowing for endogenous skill formation, the effects of a globalization shock, global technological change, and a change in the educational capital stock on skill premia and employment levels are derived. In contrast to a model with exogenous factor supplies, international wage and unemployment differentials are affected by global shocks. Ce texte analyse le commerce dans un monde 2 × 2 × 2 ou les deux pays (Europe et Amerique) different dans leurs preferences quant a l'inegalite de salaires. Les considerations de salaires equitables compressent les differentiels de salaires entre les pays. Les travailleurs europeens ont une plus grande aversion pour l'inegalite de salaires, et l'Europe est caracterisee par des differentiels de salaires plus bas et un taux de chomage plus eleve. En postulant qu'il y a developpement endogene des habiletes, on derive les effets d'un choc de globalisation, d'un changement technologique global, et d'un changement dans le stock de capital educationnel sur les primes aux habiletes et sur les niveaux d'emploi. Contrairement a ce qui se passe dans un modele ou l'offre de facteurs est exogene, les differentiels internationaux entre niveaux de salaires et de chomage sont affectes par les chocs globaux.

This article compares Canada and the United States in terms of the evolution of the relative wages of production and non-production workers in the manufacturing sector. The results show that the wage ratio is affected by similar economic globalisation variables in each country. Other than technological changes, however, the overall effect of globalisation is more pronounced in Canada. Among economic globalisation variables, such as technological changes and imports from developing countries, the latter has had a less harmful effect on low-skilled workers in the United States than those in Canada. Among the other variables, the wage gap is more affected by union density in Canada. The impact of immigration is low in both countries.

This study analyzes the role of human capital and job attributes, i.e., supply-side determinants, in determining wages in a period of trade liberalization. Using the Mincerian earning function and based on data from the Labor Force Surveys, we construct a model to estimate various wage determinants and compute the rates of return to different educational qualifications and relative occupational wage shares for the years 2005/06 and 1990/91. The estimated earning functions for 1990/91 and 2005/06 are compared to investigate whether individual characteristics—such as gender, job location, nature of job, educational qualifications, and different occupations—cause the wage gap to widen or contract under conditions of trade liberalization. The mean and quantile regression approach is used for estimation purposes. Our key findings postulate (i) an increasing gender pay gap, (ii) a higher wage premium to the highest educational qualification, and (iii) more or less stable relative wages for different occupations over time. In addition, wage dispersion across occupational groups appears more pronounced in 1990/91 than in 2005/06, implying a declining trend in the difference in wage distribution across occupations. Our findings suggest that trade liberalization cannot be presumed to pose a threat to the labor market in the wage context. However, exposing labor to an open market has not increased the productivity and skills of labor or helped reap the potential benefits of trade liberalization.

This paper incorporates equilibrium unemployment caused by efficiency wages into a monopolistic competition model of trade. Worker effort is treated as an endogenous variable that depends on the optimizing behaviour of firms and workers. Opening up trade induces firms to demand greater worker effort and to cut the size of their workforce. This counteracts the positive employment effect due to entry of firms. Circumstances are indicated in which the two effects just balance, leaving aggregate employment unchanged. Trade unambiguously increases worker effort, thereby enhancing within-firm productivity.