Union Wage Strategies and International Trade

We characterise a full set of possible international trade regimes for different combinations of wages in a two-country model of oligopoly with a homogeneous product. We show that the nature of any equilibrium trade will be either inter-industry (one-way) or intra-industry (two-way) depending on (endogenous) union choices between high and low-wage strategies. We show that intra-industry trade is the more likely the lower are trade costs, and that under intra-industry trade, falling trade costs lead monopoly unions to set higher wages, but the opposite obtains under inter-industry trade.     

What is behind low wages in central and eastern Europe?

This paper compares wages across Europe in relation to the characteristics of workers and firms, with a particular focus on wage levels in central and eastern European countries. Worker and workplace endowments can be taken as a proxy for labour productivity. We estimate the extent to which wage differences observed at an aggregate level can be related to the different compositions of workforces and workplaces, as well as the types of jobs conducted in separate countries. We also decompose the observed differences in returns on endowments by identifying the sectors and occupational categories that contribute most to the wage gaps observed at the aggregate level. The wage gaps in low-wage countries actually appear larger once differences in worker, work and workplace characteristics are controlled for. In contrast, the differences in wages between high-wage countries diminish when we control for these endowments. The wage gap between East and West thus seems to be explained by a much lower return on skills and other characteristics rather than by differences in the composition of workforces and firms. Sectoral and occupational analysis suggests that central and eastern European countries have developed a generalised low-cost and low-wage model, with relative returns particularly low on higher skills. There is much less wage disparity across European countries in more labour intensive and lower-paid services sectors, such as accommodation and food service activities. The magnitude of the wage gap seems to be driven by the relative position of sectors and occupations in high-wage countries.     

Vertical Specialization and International Business Cycle Synchronization*

We explore the impact of vertical specialization—trade in goods across multiple stages of production—on the relationship between trade and business cycle synchronization across countries. We develop an international business cycle model in which the degree of vertical specialization varies with trade barriers. With perfect competition, we show analytically that fluctuations in measured total factor productivity are not linked across countries through trade. In numerical simulations, we find little dependence of business cycle synchronization on trade intensity. An extension of the model to allow for imperfect competition has the potential to resolve these shortcomings.     

From great depression to great recession

This paper presents an overview of the history of thought on the factor content of trade. It emphasizes that the conditions of factor price equalization do not hold. It describes a theory of destructive trade that is at the root of the Great Recession of 2008 and 2009. Jobs outsourced to low-wage countries may have long-run effects on unemployment in countries that are abundant in capital.     

数字服务贸易与国家创新能力：基于收入差距的中介效应研究

作为一种新的贸易形态与商业模式,数字服务贸易在推动国家创新发展中的作用愈发显现。本文基于2011—2019年全球66个国家的面板数据,就数字服务贸易对国家创新能力的影响作用进行了实证研究,探讨收入差距在二者之间可能发挥的作用,并基于不同经济发展水平的国家样本展开了异质性分析。结果表明：数字服务贸易对国家创新能力的提升具有显著的正向影响;收入差距在二者之间发挥部分中介作用;高收入国家发展数字服务贸易对国家创新能力的显著提升作用更强,而中等收入国家受限于经济发展所处阶段,短期内一定的收入差距可以阶段性地提升国家创新能力,但长期来看,仍需避免收入差距过快拉大的现象。为此,包括我国在内的中等收入国家需要在既定发展条件下,通过改革收入分配制度,推动数字服务贸易与收入差距协调发展,进而共同促进国家创新能力的提升。     

GAINS FROM TRADE WITH VARIABLE TRADE ELASTICITIES

We measure gains from trade in multisector economies with nonhomothetic preferences where changes in trade costs generate reallocation of expenditure across sectors. We show how to measure the trade elasticity and how it relates to welfare. In this environment, the trade elasticity now varies both across countries and with levels of trade costs. In an application, we find that the trade elasticity varies substantially across countries and that the gains from moving from autarky to observed trade are on average between 24% and 28% greater than in a model where the trade elasticity is constant.     

Skill-upgrading and internationalization: Country-of-origin or end-use of products

The relationship between skill-upgrading and internationalization is addressed by decomposing import after country-of-origin and end-use of products. The break-down after country-of-origin is of crucial importance, implying that international trade with low-wage countries leads to comprehensive skill-upgrading.     

Growth,expectations and tariffs

We present a growth model of international trade in which expectations about profitability and growth influence innovation and investment. Adaptive learning dynamics determine transition paths for countries with differing structural parameters. Countries limiting trade by tariffs on imports of capital goods can experience gains in growth and perceived utility for a finite time, whereas the rest of the world is adversely affected. Asymmetric gains persist longer when structural advantages of the country applying tariffs are larger. Substantial differences in levels of innovation, output and utility can appear within our asymmetric country setting.     

Evaluating the Impact of the US–China Trade War

We evaluate the impact of the US–China trade war using a dynamic computable general equilibrium (CGE) model of global trade. We conduct ex ante simulation analysis exploring three scenarios to understand how the trade war affects import tariffs, investment, and productivity. The escalation of the trade war reduces gross domestic product (GDP) in China and the USA by ?1.41% and ?1.35%, respectively. The trade war reduces nearly all sectoral imports and outputs in both countries. To reflect the important role of global value chains (GVCs), we modify the dynamic CGE model with agent‐specific import demands, and we explore the difference between the results for the two models relating to the trade war impacts on GDP and bilateral trade. When GVCs are accounted for, the negative impacts on bilateral trade are more widespread across countries, and world GDP in the modified model is reduced by ?$US450 billion. These results suggest that the GVCs play substantial role in determining trade responses at the disaggregated level.     

Permit markets,carbon prices and the creation of innovation clusters

Innovation clusters combining public and private effort to develop breakthrough technologies promise greater technological advances to slow down climate change. We use a multi-country model with an emission trading system to examine whether and how international climate policy can incentivize countries to create such innovation clusters. We find that a minimal carbon price is needed to attract applied research firms, but countries may nevertheless fail to invest in complementary research infrastructure. We construct a mechanism that leads to innovation clusters when emissions targets are set before uncertainty surrounding technological developments is resolved. It is a combination of low permit endowments for the country with the lowest costs to build the needed infrastructure, compensation for this country by profits from permit trade, and maximal possible permit endowments for the remaining countries. We outline how the EU-ETS can be further refined according to this mechanism.     

Low-wage mobility in the Portuguese labour market

Low-wage employment has become a matter of concern in many countries, Portugal being among them. In particular, the extent to which low-wage employment is a permanent or transitory situation is an important issue. This paper examines low-wage mobility in the Portuguese labour market using the bivariate probit model proposed by van de Ven and van Praag (1981), in order to account for the potential endogeneity of the initial state. For this purpose, we use a matched employer-employee panel data for 1996 and 2000. Raw figures show that a significant number of workers are trapped into low-wage employment. We also find that males and the better-educated are more likely to escape from such a situation. Furthermore, initial firm characteristics, such as firm size, age and industry influence mobility. In particular, low-wage workers in larger or in newer firms have better mobility prospects.JEL Classification: J31, J42Financial support from the Portuguese Science Foundation and FEDER under grant POCTI/ECO/37668/2001 is acknowledged. The author is indebted to an anonymous referee for helpful comments and suggestions. The usual disclaimer applies.     

Trade and the adoption of a universal language

This paper investigates long-run consequences of international trade between two economies inhabited by two distinct races using different languages. If wages are not equal in autarky, free trade encourages the workers of the low-wage country to learn the language of the high-wage country. As the bilingual population increases in the low-wage country, products are increasingly produced in the dominant-language version. In the long run the language of the high-wage country becomes universally adopted.     

ON THE OUTPUT EFFECTS OF BARRIERS TO TRADE*

We study the macroeconomic effects of international trade policy by integrating a Hecksher–Ohlin trade model into an optimal‐growth framework. The model predicts that a more open economy will have higher factor productivity. Furthermore, there is a “selective development trap” to which countries may or may not converge, depending on policy. Income at the development trap falls as trade barriers increase. Hence, cross‐country differences in barriers to trade may help explain the dispersion of per capita income observed across countries. The effects are quantified, and we show that protectionism can explain a relevant fraction of TFP and long‐run income differentials across countries.     

Home and regional biases and border effects in Armington type models

We discuss biases in preferences and their trade effects in terms of impacts on non-neutral trade flows motivated by recent literature on both home bias and the border effect. These terms take on multiple definitions in the literature and are often used interchangeably even though they differ. The border effect refers to a higher proclivity to trade behind rather than across national borders and is usually defined by the coefficients of regional dummies from an estimated gravity model. It can be present both in data and in counterfactual model solutions. Sometimes the reduced form of the gravity model used is asserted to reflect an Armington type model. For the border effect to occur as a model outcome, a structural model with at least 2 home regions and 1 country abroad is needed. In contrast to current literature, we offer a characterization of various forms of preference bias in trade models and measures of their associated trade effects based on a concept we term trade neutrality. These effects go beyond conventional border effects, and can be both across and within borders. Home bias is typically specified as an Armington preference for domestic over comparable foreign products in a trade model where goods are heterogeneous across countries. It is reflected in both model structure and parameterization, but defined in several different ways in the literature. We assess the contribution of each form of bias to the set of possible trade effects using a calibrated model with 3 Canadian regions, the U.S., and the rest of the world using 2001 data. We also evaluate how much of the conventional border effect is accounted for when model biases are modified in various ways.     

Technology and the dynamics of comparative advantage

This paper explores how trade affects innovation in a two‐country, two‐good, two‐factor Heckscher–Ohlin model with heterogeneous firms. Trade openness induces an increase in process innovation in both industries. The increase is stronger in the comparative advantage industry. Trade openness boosts prospective entrants' profits in that industry, which leads to further increases in product innovation. Trade liberalization generates a different relative impact on innovation across industries, depending on trade costs. When they are high (low), it increases process innovation relatively more in the comparative advantage (disadvantage) industry, leading to TFP divergence (convergence) across industries.     

跨国公司全球化生产模式的理论分析——基于行业的视角

本文在迪克希特-斯蒂格里茨(D-S)垄断竞争模型的基础上,建立了一个3×2×2模型,分析了不同行业特性对跨国公司生产模式的影响.结果表明,跨国公司的生产模式和其自身行业特性有很大关系,某一生产环节投资的固定成本越低,跨国公司越倾向于将其转移到低成本国家;东道国市场规模越大,越有利于吸引跨国公司投资;成品的交易成本越高,跨国公司越倾向于采取本地组装的生产模式;中间品交易成本越高,跨国公司越倾向一体化的生产模式,将中间品和组装放在一起,分散在多国生产.该模型的分析结果和现实情况基本吻合,对分析跨国公司如何在全球组织其生产活动具有很好的解释力.     

The effects of offshoring to low-wage countries on domestic wages: a worldwide industrial analysis

This paper extends the literature on the implications of offshoring for labour markets by investigating its effect on the wages of different skill groups in a broad global context. The analysis draws on input–output data from the WIOD project, and in the panel analysed (13 manufacturing industries, 40 countries, 1995–2009) we account for up to 96 % of the international trade in manufacturing inputs. Being particularly interested in the wage effects of offshoring to low-wage countries (LWC), we use precise LWC classifications (varying across industries and time) to decompose overall offshoring by source country. We use a decomposition of the conventional offshoring measure in order to capture its pure international component, which is further instrumented using a gravity-based strategy. According to the estimation results, the negative impact of offshoring on wages mainly concerns low and medium skilled workers. However, in terms of magnitude, the downward pressure on domestic wages exhibited by offshoring to LWC is relatively small.     

International Integration,Trade, and the Great Recession

In the wake of the Great Recession, almost all countries suffered a severe and synchronized trade collapse unlike any seen since the Great Depression. To the extent that economic integration fosters trade among countries, this paper examines the role that international integration played in moderating the negative shock caused by the Great Recession on trade. The methodology adopted is a modified gravity model in which we control for the Great Recession, different forms of integration, as well as the interaction between integration and the recession. Measuring integration in three different ways, the findings show that countries that were more integrated fared better in trade – the extent of trade collapse was milder – than less integrated countries. Specifically, Regional Trade Agreement, as a form of trade integration, had a positive and robust effect on trade during the Great Recession. This positive effect is also robust across regions and countries around the world. In a nutshell, countries that are into some form of trade agreements are better-positioned to absorb negative demand-side shocks caused by economic recessions than similar countries without such agreements.     

A tale of two countries: Directed technical change,trade and migratory movements

We propose a North-South model that reconciles trade and production strategies, flows of innovators and the path of economic divergence, or convergence, between countries. We explain the mechanisms behind these forces and show how the technological and economic gaps can be reversed if southern countries stop imitating northern goods and, instead, produce complementary goods. Such a strategy of complementarity on production yields the necessary incentives to innovators to engage in research in southern countries, which enhances the catching-up process between countries. It is also shown that migratory movements of unskilled labor between countries are also relevant to understand the dangers and benefits of different trade strategies for economic growth. This paper suggests a positive (negative) correlation between technological innovation in the North (South) and the level of substitutability in production, while under complementarity, technological innovation catches up in the South, therefore fostering the economic catching up process. A positive correlation between inflows of skilled and unskilled labor and substitutability of production between countries is also verified.     

Preferential versus multilateral trade liberalization and the role of political economy

In this paper we analyze the effect of the freedom to pursue preferential trade liberalization, permitted by Article XXIV of the GATT, on country׳s incentives to participate in multilateral negotiations and on feasibility of global free trade. We present a model, in which countries choose whether to participate in preferential or multilateral trade agreements under political pressures from domestic special interest groups. We show that heterogeneity in political preferences across countries plays an important role in determining the relative merits of preferential and multilateral approaches to trade liberalization. On one hand, the opportunity to liberalize preferentially may be necessary to induce countries with strong political motivations to participate in multilateral free trade negotiations. On the other hand, when countries share similar political preferences, multilateral free trade that would have been politically supported otherwise becomes unattainable if countries can pursue preferential liberalization.