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Offshore Assembly from the United States: Production Characteristics of the 9802 Program

In: The Impact of International Trade on Wages

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Author Info

  • Robert C. Feenstra
  • Gordon H. Hanson
  • Deborah L. Swenson

Abstract

We study outsourcing from the United States under the offshore assembly program (OAP). Formerly called the 806/807 provision of the U.S. tariff code, and now renamed the 9802 provision of the Harmonized System code, this program allows U.S. firms to export component parts and have them assembled overseas. When the finished product is imported back into the United States, duties are paid only on the foreign value-added. We estimate the production characteristics of the U.S. OAP activity, and in particular, whether this activity is intensive in the use of non-production labor as compared to the overseas production. We also examine the sensitivity of OAP imports to real exchange rate movements.

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This chapter was published in:

  • Robert C. Feenstra, 2000. "The Impact of International Trade on Wages," NBER Books, National Bureau of Economic Research, Inc, number feen00-1, October.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 6191.

    Handle: RePEc:nbr:nberch:6191

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    References

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    1. Markusen, James R. & Venables, Anthony J., 1998. "Multinational firms and the new trade theory," Journal of International Economics, Elsevier, vol. 46(2), pages 183-203, December.
    2. Deborah L. Swenson, 1996. "Explaining Domestic Content: Evidence from Japanese and U.S. Auto Production in the U.S," NBER Working Papers 5495, National Bureau of Economic Research, Inc.
    3. Feenstra, Robert C & Hanson, Gordon H, 1996. "Globalization, Outsourcing, and Wage Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 240-45, May.
    4. Werner Antweiler & Daniel Trefler, 2000. "Increasing Returns and All That: A View From Trade," NBER Working Papers 7941, National Bureau of Economic Research, Inc.
    5. Sven W. Arndt, 1998. "Super-Specialization And The Gains From Trade," Contemporary Economic Policy, Western Economic Association International, vol. 16(4), pages 480-485, October.
    6. Krugman, Paul R & Venables, Anthony J, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 857-80, November.
    7. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, vol. 42(3-4), pages 371-393, May.
    8. Jose Campa & Linda S. Goldberg, 1997. "The Evolving External Orientation of Manufacturing Industries: Evidence from Four Countries," NBER Working Papers 5919, National Bureau of Economic Research, Inc.
    9. repec:fth:prinin:375 is not listed on IDEAS
    10. Alan Krueger, 1997. "Labor Market Shifts and the Price Puzzle Revisited," Working Papers 754, Princeton University, Department of Economics, Industrial Relations Section..
    11. Feenstra, R.C. & Hanson, G.H., 1995. "Foreign Investment, Outsourcing and Relative Wages," Department of Economics 95-14, California Davis - Department of Economics.
    12. Arndt, Sven W., 1997. "Globalization and the open economy," The North American Journal of Economics and Finance, Elsevier, vol. 8(1), pages 71-79.
    13. Paul Krugman, 1995. "Growing World Trade: Causes and Consequences," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 327-377.
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    Cited by:
    1. Hoekman & Bernard & Winters, L. Alan, 2005. "Trade and employment : stylized facts and research findings," Policy Research Working Paper Series 3676, The World Bank.
    2. João Amador & Sónia Cabral, 2008. "International Fragmentation of Production in the Portuguese Economy: What do Different Measures Tell Us?," Working Papers w200811, Banco de Portugal, Economics and Research Department.
    3. Amador, João & Cabral, Sónia, 2008. "Vertical specialization across the world: a relative measure," MPRA Paper 9618, University Library of Munich, Germany.
    4. Tomiura, Eiichi, 2005. "Foreign outsourcing and firm-level characteristics: Evidence from Japanese manufacturers," Journal of the Japanese and International Economies, Elsevier, vol. 19(2), pages 255-271, June.
    5. Deborah Swenson, 2006. "Competition and the Location of Overseas Assembly," Working Papers 638, University of California, Davis, Department of Economics.
    6. De Hoyos, Rafael E. & Iacovone, Leonardo, 2011. "Economic performance under NAFTA : a firm-level analysis of the trade-productivity linkages," Policy Research Working Paper Series 5661, The World Bank.
    7. Hiau Looi Kee, 2001. "Productivity versus endowments - a study of Singapore's sectoral growth, 1974-92," Policy Research Working Paper Series 2702, The World Bank.
    8. Don Clark, 2006. "Country and industry-level determinants of vertical specialization-based trade," International Economic Journal, Taylor & Francis Journals, vol. 20(2), pages 211-225.
    9. Alexander Hijzen & Holger Görg & Robert C. Hine, 2005. "International Outsourcing and the Skill Structure of Labour Demand in the United Kingdom," Economic Journal, Royal Economic Society, vol. 115(506), pages 860-878, October.
    10. Deborah L. Swenson, 2004. "Overseas Assembly and Country Sourcing Choices," NBER Working Papers 10697, National Bureau of Economic Research, Inc.
    11. Witada Anukoonwattaka, 2007. "Outsourcing and International Production of a Multinational: A Theoretical Model and Empirical Evidence from Toyota, Thailand," DEGIT Conference Papers c012_045, DEGIT, Dynamics, Economic Growth, and International Trade.
    12. Kurokawa, Yoshinori, 2006. "Skill Intensity Reversal and the Rising Skill Premium: Evidence from the U.S. and Mexico," MPRA Paper 14013, University Library of Munich, Germany.
    13. Gouranga Das, 2009. "A hybrid production structure in trade: theory and implications," International Review of Economics, Springer, vol. 56(4), pages 359-375, December.

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