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The role of imports in expanding the demand gap between skilled and unskilled labour in the US

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  • Christis Tombazos

Abstract

A unit cost function is employed, in the context of the production theory approach, to estimate the Allen - Uzawa effect of aggregate imports on skilled and unskilled labour in the US. The model corrects for two ubiquitous shortcomings of similar studies: (i) their disregard for the role of nonmanufactured imports, including imports of services, in domestic production, and (ii) their inability to capture, in addition to the conventional domestic-output-substitution effects of the Stolper-Samuelson variety, the impact of imports on the demand for primary factors that is generated via domestic factor-using downstream processes. To circumvent curvature related problems, often associated with similar studies that do not invoke separability, we combine the global imposition of concavity with a symmetric normalized quadratic representation of the unit cost function (that remains flexible after curvature enforcing reparametrizations). The results confirm the notion that imports hurt unskilled labour. However, they also reveal a previously ignored positive impact of aggregate imports on the demand for skilled labour that is qualitatively independent of the measure of skill employed. This result is attributed to skill intensive downstream processes of aggregate imports and reaffirms the importance of 'downstream handling' in stimulating labour demand first identified by Aw and Roberts (Review of Economics and Statistics, 67, 109-17, 1985).

Suggested Citation

  • Christis Tombazos, 1999. "The role of imports in expanding the demand gap between skilled and unskilled labour in the US," Applied Economics, Taylor & Francis Journals, vol. 31(4), pages 509-516.
  • Handle: RePEc:taf:applec:v:31:y:1999:i:4:p:509-516 DOI: 10.1080/000368499324228
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    Cited by:

    1. Falk, Martin & Koebel, Bertrand M., 2000. "Outsourcing of services, imported materials and the demand for heterogeneous labour : an application of a generalised box-cox function," ZEW Discussion Papers 00-51, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    2. Christis G. Tombazos, 2010. "Trade and Wage Inequality in a World of Incomplete Diversification," Chapters,in: Globalization and Economic Integration, chapter 8 Edward Elgar Publishing.
    3. Robert Feenstra & Gordon Hanson, 2001. "Global Production Sharing and Rising Inequality: A Survey of Trade and Wages," NBER Working Papers 8372, National Bureau of Economic Research, Inc.
    4. Martin Falk & Bertrand Koebel, 2001. "A dynamic heterogeneous labour demand model for German manufacturing," Applied Economics, Taylor & Francis Journals, vol. 33(3), pages 339-348.
    5. Tombazos, Christis G., 1999. "The impact of imports on the demand for labor in Australia," Economics Letters, Elsevier, vol. 62(3), pages 351-356, March.
    6. Kurt KRATENA, "undated". "Intra-Industry Trade and Input Demand," EcoMod2004 330600084, EcoMod.
    7. Tarjáni, Hajnalka, 2006. "A technológiai fejlődés és a kereskedelem hatása a szakképzettségi prémiumra
      [Analysing the impacts of technological development and trade on the skill premium in Hungary]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(3), pages 226-234.
    8. Halpern, László & Koren, Miklós & Szeidl, Adam, 2005. "Imports and Productivity," CEPR Discussion Papers 5139, C.E.P.R. Discussion Papers.
    9. Kurt Kratena, 2004. "Intra-Industry Trade and Input Demand," WIFO Working Papers 238, WIFO.

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