An extension of Bale's labor displacement cost estimates

Bale (1976) failed to extend his labor displacement cost estimates to the more interesting question of whether these costs outweigh gains from trade liberalization. This note addresses that question by applying Bale's estimates to Magee's (1972) study of the welfare effects of U.S. trade restrictions. Our results indicate that gains far outweigh costs of tariff removal on imports directly competing with U.S. production.     

The calculation of bilateral trade patterns in a Ricardian model with intermediate products and barriers to trade

After arguing for a computational approach to the theory of international trade the paper presents an algorithm for solving a generalized Ricardian two-country model. The algorithm focuses on the ‘critical exchange ratios’ at which the pattern of specialization changes. In the absence of barriers to trade there is one exchange ratio (defined as the value of one country's labor in terms of the other country's labor) at which production of a good moves from one country to the other. With barriers to trade there are two critical ratios for each good, between which it is not traded. Taking the critical ratios in sequence the trade balance can be calculated as a discontinuous function of the exchange rate; where the balance equals zero (or some given transfer) the problem is solved. The method works with arbitrary demand functions and can handle intermediate products.     

Book review

The existing literature on offshoring neglects the importance of host country conditions in affecting the boundaries of a firm. In this paper, we focus on the role of the host country's human capital in affecting the organization of offshore production. Acknowledging that an input is produced offshore only after training the host labor, we propose that this training cost depends on the human capital gap between the home and the host country. Our model finds that a sourcing firm prefers to offshore production internationally only if the human capital gap between the home and the host country is below a threshold. Secondly, as the human capital gap increases, the probability for international outsourcing vis-à-vis intra-firm trade increases. Finally, as opposed to conventional wisdom, our model shows the possibility of outsourcing inputs of a high-tech good when the human capital gap between the home and the host is high.     

Unemployment,tariffs and the theory of international trade

In this paper, we introduce diminishing returns to scale in Brecher's model of international trade with unemployment and then investigate some issues embodied in the theory of international trade. Our principal results are that tariffs need not improve a country's terms of trade and that capital accumulation also need not result in a predictable change in the terms of trade.     

中国对外贸易的劳动就业效应:贸易结构视角

文章旨在分析中国对外贸易结构变动在劳动就业以及城乡劳动力转移中产生的作用。文章认为中国对外贸易的发展有利于劳动就业水平的提升;对外贸易结构的改善有利于促进中国农村劳动力向城市转移,优化劳动就业结构;城乡劳动力转移,农村人口比重的降低,不能仅仅依靠农业的发展,而必须以第二、三产业发展为依托,不能单纯依靠经济规模的扩大和投资的增加,而需要通过产业结构调整,促进城乡联动;对外贸易劳动就业效应的可持续发挥需以经济增长和资本积累为基础;社会劳动就业的增长,就业结构的改善有利于促进经济增长和资本积累。     

On the transformation of theorems

Professor W. Ethier (1979) has argued that replacing land by capital in the familiar 2×2 trade model leaves the four basic theorems unaffected, with time-phasing and a positive interest rate. In fact, Ethier's HOS and FPE theorems are different in kind from the traditional ones. The traditional theorems predict certain results in terms of trade-independent data: Ethier's theorems describe equilibrium in terms of factor endowments and intensities defined by equilibrium prices. Hence his theorems do not support his central message that nothing is lost in trade theory by treating capital as if it were homogeneous land.     

South-north trade and southern growth: Bleak prospects from the structuralist point of view

A three-country, three-commodity model is developed to illustrate the dynamics of growth among the ‘North’, the ‘South’ and ‘OPEC’. One conclusion is that the Southern growth rate will be increased by faster growth of Northern capital, with a steady state response coefficient of unity. However, if the steady state is perturbed by increases in Northern productivity or the oil price, then the coefficient becomes less than one. In the short run, higher capital flows from North to South increase the former's growth rate but may have only marginal impact on growth in the South. Higher productivity in the South will slow its growth rate and reduce its terms of trade when the Engel elasticity of Northern demand for its exports is less than one. These and other results follow from surplus labor in the South and its dependent position in international trade, from which it will be difficult to escape.     

Welfare implications of trade liberalization and fiscal reform: A quantitative experiment

This paper studies the welfare implications of revenue-neutral trade liberalization and fiscal reform programs for developing economies using a multi-sector dynamic general equilibrium model of a small open economy. We analyze how different combinations of tariffs – on imported consumption goods, intermediate inputs, and capital goods – and taxes – on consumption, labor income and capital income – affect the transitional and long-run welfare. We report three main findings. First, trade liberalization programs financed by consumption and labor income taxes tend to result in substantial welfare gains, but financing the lost tariff revenue through capital income taxes can have an adverse impact on welfare. Second, a significant fraction of welfare changes is due to transitional effects stemming from the allocation of resources in response to changes in tariffs and taxes. Third, trade liberalization and fiscal reform programs often translate into much larger welfare gains in countries that are more open to international financial markets.     

REVEALED PREFERENCE TESTS OF THE STOLPER?SAMUELSON THEOREM

This article conducts revealed preference tests of the Stolper-Samuelson theorem. If the Stolper?Samuelson theorem holds, one would expect to find a country's relatively scarce factor of production (in this case labor) harmed from trade liberalization and thus opposing trade liberalization. The reverse would be true for its relatively abundant factor of production (in this case capital). Therefore, this article examines representations made before the Canadian House of Commons committee studying the Canadian?U.S. Free Trade Agreement. Assuming representations coincide with the self-interest of the presenters, the effects of trade liberalization on factor returns are inferred. It finds strong support for the proposition that labor behaves as the Stolper?Samuelson theorem would predict and qualified support for capital behaving as the Stolper?Samuelson theorem would predict.     

Sanyal and Jones on trade in middle products

This paper reports, for the first time, empirical estimates of one of the most ingenious models of trade in intermediate products – the model of Sanyal and Jones. We show how the restrictions implied by the Sanyal and Jones production structure can be imposed and tested with the help of aggregate data even though information about the allocation of inputs and outputs between tiers and industries is not available. A new theoretical concept, that of 'disjoint production' is introduced. We also propose a new functional form that is a generalization of the Symmetric Normalized Quadratic restricted profit function.     

The factor content of Chinese trade

This article demonstrates that the growth of China's exports in recent years is consistent with the Heckscher–Ohlin–Vanek (HOV) prediction of the factor content of trade based on international differences in factor endowments, after adjusting for substantial differences in factor-specific productivity. A comparison of the Organisation for Economic Co-Operation and Development input–output data in the year 2000 shows that China's labor productivity relative to the United States is the lowest in a sample of 33 diverse countries, although China's capital is more productive than US capital. This in turn demonstrates the importance of a factor-specific rather than factor-neutral productivity adjustment common in much of the HOV literature. The use of value-added data to measure factor usage helps to correct for unobserved differences in factor qualities and differences in productivity across sectors, as is demonstrated for China. China's low average labor productivity reflects the structure of the Chinese economy where most employment is still in the inefficient agriculture and service sectors, with only 11% of employment in the more modern export-oriented manufacturing sector. Due to a trade surplus, China exports both labor and capital but Leamer's (The Journal of Political Economy 1980;88: 495–503) test for trade-revealed factor abundance confirms that China is labor abundant even after substantial factor-specific productivity adjustments.     

人力资本、南北贸易与经济增长:一个分析框架

在Dixit和Norman、Grossman和Helpman的基础上构造了一个以人力资本为基础的内生技术变迁的国际贸易模型来考察南北贸易对经济增长的动态影响。和以前的文献不同,假定不存在技术的外部性,只存在人力资本的外部性,人力资本积累既是经济增长的源泉,又是贸易影响经济增长的动态机制的决定力量。初始人力资本禀赋决定着贸易分工,人力资本相对积累率决定着分工模式的演变和创新能力的消长,从而决定着长期增长率。因而,对于南方国家而言,提高人力资本积累率是其改变分工地位、提高创新能力、缩小经济差距甚至在长期内实现经济赶超的根本选择。     

On the similarity of country endowments

We study the production side of the Heckscher-Ohlin model empirically. The evidence we present suggests that the endowments of countries around the world are too dissimilar for all countries to be able to produce the same set of goods. In contrast, the endowments of the rich OECD countries are sufficiently similar, so that these countries do not have to specialize in different subsets of goods. Our findings have implications for a variety of issues ranging from the trade and wages debate to economic development. Our analysis relies on the lens condition of Deardorff [Journal of International Economics 36 (1994) 167-175] that compares country endowments with sectoral factor inputs. We mainly focus on the production factors capital and labor. We test the robustness of the results with different data sets and with corrections for international differences in productivity and human capital. We confirm the similarity of the developed OECD countries with skilled and unskilled labor data. We also investigate in detail the implications of measurement error and sectoral aggregation.     

The national defense tariff argument reconsidered

What is a country's optimal trade policy when embargoes and other trade interruptions are threatening? In addressing this issue, the paper emphasizes the nature of adjustment impediments when an effective embargo forces the economy to alter its production pattern abruptly. A production subsidy on the imported good represents the optimal policy choice, a tariff being a second-best instrument. The tariff's superiority to free trade implies, in turn, that the conventional classification of the national defense tariff as a noneconomic argument is inappropriate since economic efficiency criteria alone can justify the tariff.     

中国制造业贸易的要素含量研究

本文应用贸易要素含量的研究方法,系统分析了1992-2002年中国的制造业贸易。研究发现,中国是低级技能劳动要素的丰裕国家,是资本和高级技能劳动要素的稀缺国家。相较于资本,中国更缺人才。不同产业部门之间,各类劳动要素分布存在巨大差异。10年间,中国所有要素禀赋都有较大改善,技术进步、贸易政策和存量积累三个因素对比较优势的变迁施加了不同的影响。其中,贸易结构日益向着密集出口低级技能劳动要素,同时更加依赖进口高级技能劳动要素和资本要素的方向演变,值得密切关注。     

Adjustment costs and theory of investment under uncertainty

It is shown that the stochastic investment rule for the price-setting monopolist facing random demand differs from the deterministic rule, due to the presence of the covariance of the marginal utility of profits and the MRTS between capital and labor. For the risk-neutral quantity-setting monopolist, the optimal current investment under random demand is shown to be greater than that under deterministic conditions, given that production technology is of the Cobb-Douglas type with constant returns to scale. When random wages and prices follow first-order autoregressive schemes, the risk-neutral competitive firm's current investment level is shown to be at least equal to that under certainty.     

Trade Costs and Current Accounts

Are trade cost reductions a plausible explanation for growing global current account imbalances? I advocate that changes in trade costs affect trade and production structures, which is likely to affect national savings and investment. Explicitly adding trade costs à la Markusen and Venables into Jin's framework, this augmented model predicts that trade cost reductions affect the current account through changes in the industrial structure. Empirical evidence confirms that the interaction of trade costs and capital intensity drives current account balances. I also provide evidence that the response of current accounts to changes in trade costs depends on the capital intensity of production and on the depth of regional agreements on trade and factor mobility. Aside from the direct effect generally emphasised in standard macro‐level analysis, changes in production patterns could therefore be an additional channel of impact of regional integration on current accounts.     

产品内贸易、分工与产业结构升级关系研究

由跨国公司主导的国际产品内分工是一种新兴的国际产业分工方式,产品内贸易是其贸易形式.在跨国公司产品内分工与贸易条件下,产业结构升级不再仅仅局限于由劳动密集型向资本、技术密集型转变,还包含同一生产价值链内部劳动密集型环节向资本、技术密集型环节的转变.改革开放以来,产品内贸易促使我国对外贸易取得了重要成果,也使我国产业发展面临被“边缘化”的风险.为进一步提升我国产业结构,推动产业结构的合理化与高级化,必须优化产业组织结构,提升企业能力;发挥产业集群的辐射带动作用,加快产业整体升级;提升产业技术结构,发挥技术的带动作用.     

A model of teenage labor supply

This paper develops a model of teenage labor supply and school participation which stresses the teenager's use of time in a family context. The family is viewed as imposing constraints on the teenager's allocation of time. The teenager maximizes his utility subject to these constraints which differ with his age, sex, and family type. Simultaneous equation estimation is used with market level (SMSA) data on teenage labor supply. Overall, we find well-behaved labor supply equations for teenage age, sex, and family-type groups. Moreover, different groups react differently to variables representing family-imposed constraints.     

Manufacturing restructuring and the role of real exchange rate shocks

Using a new and extensive micro data set we investigate the impact of a change in international competitive pressure on industrial performance and restructuring. Unlike previous studies we are able to account for the heterogeneity across firms in their exposure to foreign competition. We focus on a situation akin to a natural experiment, and examine the impact of a sharp real appreciation of the Norwegian Krone in the early 2000s on Norwegian manufacturing firms which differ substantially in their trade orientation. A change in the real exchange rate (RER) affects a firm through three different channels: (i) firm's export sales, (ii) firm's purchases of imported inputs, and (iii) import competition faced in the domestic market. Unlike previous studies, we are able to examine all three channels. Both net exporters and import-competing firms were exposed to increased competition due to the real appreciation. Both groups reacted by shedding labor, but only the first group experienced increasing labor productivity. Partly, the productivity improvements came from measured TFP gains, while capital deepening does not appear to have been affected by the shock.