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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, July.
    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. Werner Antweiler & Daniel Trefler, 2000. "Increasing Returns and All That: A View From Trade," NBER Working Papers 7941, National Bureau of Economic Research, Inc.
    2. Arndt, Sven W., 1997. "Globalization and the open economy," The North American Journal of Economics and Finance, Elsevier, vol. 8(1), pages 71-79.
    3. 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.
    4. 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.
    5. Robert C. Feenstra & Gordon H. Hanson, 1995. "Foreign Direct Investment and Relative Wages: Evidence from Mexico's Maquiladoras," NBER Working Papers 5122, National Bureau of Economic Research, Inc.
    6. Feenstra, R.C. & Hanson, G.H., 1995. "Foreign Investment, Outsourcing and Relative Wages," Papers 95-14, California Davis - Institute of Governmental Affairs.
    7. 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.
    8. 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.
    9. repec:fth:prinin:375 is not listed on IDEAS
    10. repec:fth:iniesr:430 is not listed on IDEAS
    11. Alan B. Krueger, 1997. "Labor Market Shifts and the Price Puzzle Revisited," NBER Working Papers 5924, National Bureau of Economic Research, Inc.
    12. 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.
    13. 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.
    14. 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. 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.
    2. Deborah L. Swenson, 2007. "Competition and the location of overseas assembly," Canadian Journal of Economics, Canadian Economics Association, vol. 40(1), pages 155-175, February.
    3. Gouranga Das, 2009. "A hybrid production structure in trade: theory and implications," International Review of Economics, Springer, vol. 56(4), pages 359-375, December.
    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. Amador, João & Cabral, Sónia, 2008. "International fragmentation of production in the Portuguese economy: What do different measures tell us?," MPRA Paper 9783, University Library of Munich, Germany.
    6. Alexander Hijzen & Holger Görg & Robert C. Hine, 2004. "International Outsourcing and the Skill Structure of Labour Demand in the United Kingdom," Discussion Papers of DIW Berlin 437, DIW Berlin, German Institute for Economic Research.
    7. Hoekman & Bernard & Winters, L. Alan, 2005. "Trade and employment : stylized facts and research findings," Policy Research Working Paper Series 3676, The World Bank.
    8. Deborah L. Swenson, 2004. "Overseas Assembly and Country Sourcing Choices," NBER Working Papers 10697, National Bureau of Economic Research, Inc.
    9. Amador, João & Cabral, Sónia, 2008. "Vertical specialization across the world: a relative measure," MPRA Paper 9618, University Library of Munich, Germany.
    10. 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.
    11. 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.
    12. 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.
    13. 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.

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