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Productivity Measurement And The Impact Of Trade And Technology On Wages: Estimates For The U.S., 1972-1990

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  • Robert C. Feenstra
  • Gordon H. Hanson

Abstract

We develop an empirical framework to assess the importance of trade and technical change on the wages of production and nonproduction workers. Trade is measured by the foreign outsourcing of intermediate inputs, while technical change is measured by the shift towards high-technology capital such as computers. In our benchmark specification, we find that both foreign outsourcing and expenditures of high-technology equipment can explain a substantial amount of the increase in the wages of nonproduction (high-skilled) relative to production (low-skilled) workers that occurred during the 1980s. Surprisingly, it is expenditures on high-technology capital other than computers that are important. These results are very sensitive, however, to our benchmark assumption that industry prices are independent of productivity. When we allow for the endogeneity of industry prices, then expenditures on computers becomes the most important cause of the increased wage inequality, and have a 50% greater impact than does foreign outsourcing.

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Paper provided by California Davis - Department of Economics in its series Department of Economics with number 97-17.

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Handle: RePEc:fth:caldec:97-17

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  1. Eric J. Bartelsman & Wayne Gray, 1996. "The NBER Manufacturing Productivity Database," NBER Technical Working Papers 0205, National Bureau of Economic Research, Inc.
  2. Berndt, Ernst R. & Morrison, Catherine J. & Rosenblum, Larry S., 1992. "High-tech capital formation and labor composition in U.S. manufacturing industries : an exploratory analysis," Working papers 3414-92., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  3. Berman, Eli & Bound, John & Griliches, Zvi, 1994. "Changes in the Demand for Skilled Labor within U.S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 367-97, May.
  4. Baldwin, Robert E & Hilton, R Spence, 1984. "A Technique for Indicating Comparative Costs and Predicting Changes in Trade Ratios," The Review of Economics and Statistics, MIT Press, vol. 66(1), pages 105-10, February.
  5. Berndt, Ernst R. & Morrison, Catherine J., 1992. "High-tech capital formation and economic performance in U.S. manufacturing industries : an exploratory analysis," Working papers 3419-92., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  6. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1997. "Computing Inequality: Have Computers Changed the Labor Market?," NBER Working Papers 5956, National Bureau of Economic Research, Inc.
  7. Robert E. Baldwin & Glen G. Cain, 1997. "Shifts in U.S. Relative Wages: The Role of Trade, Technology and Factor Endowments," NBER Working Papers 5934, National Bureau of Economic Research, Inc.
  8. Martin Neil Baily & Robert J. Gordon, 1988. "The Productivity Slowdown, Measurement Issues, and the Explosion of Computer Power," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(2), pages 347-432.
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Cited by:
  1. Johannes Fedderke & Yongcheol Shin, 2004. "Trade, Technology and Wage Inequality in the South African Manufacturing Sectors," ESE Discussion Papers 106, Edinburgh School of Economics, University of Edinburgh.
  2. Guillaume Daudin & Christine Rifflart & Danielle Schweisguth, 2011. "Who Produces for Whom in the World Economy?," Post-Print halshs-00924985, HAL.
  3. Aekapol Chongvilaivan, 2012. "Learning by exporting and high-tech capital deepening in Singapore manufacturing industries, 1974--2006," Applied Economics, Taylor & Francis Journals, vol. 44(20), pages 2551-2568, July.
  4. Bernard Hoekman & Alan L. Winters, 2005. "Trade and Employment: Stylized Facts and Research Findings," Working Papers 7, United Nations, Department of Economics and Social Affairs.
  5. Robert C. Feenstra, . "Integration Of Trade And Disintegration Of Production In The Global Economy," Department of Economics 98-06, California Davis - Department of Economics.
  6. World Bank, 2004. "Inequality and Economic Development in Brazil," World Bank Publications, The World Bank, number 14913, August.
  7. Nicita, Alessandro, 2004. "Who benefited from trade liberalization in Mexico? Measuring the effects on household welfare," Policy Research Working Paper Series 3265, The World Bank.
  8. Shandre M. Thangvelu, . "Trade, Technology, Foreign Firms and Wage Gap: Case of Vietnam Manufacturing Firms," Chapters, Economic Research Institute for ASEAN and East Asia (ERIA).
  9. Shalah Mostashari, 2011. "Vertical specialization, intermediate tariffs, and the pattern of trade: assessing the role of tariff liberalization to U.S. bilateral trade 1989-2001," Globalization and Monetary Policy Institute Working Paper 71, Federal Reserve Bank of Dallas.

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