IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Global Production Sharing and Rising Inequality: A Survey of Trade and Wages

  • Robert Feenstra
  • Gordon Hanson

We argue that trade in intermediate inputs, or 'global production sharing,' is a potentially important explanation for the increase in the wage gap between skilled and unskilled workers in the U.S. and elsewhere. Using a simple model of heterogeneous activities within an industry, we show that trade in inputs has much the same impact on labor demand as does skill-biased technical change: both of these will shift demand away from low-skilled activities, while raising relative demand and wages of the higher skilled. Thus, distinguishing whether the change in wages is due to international trade, or technological change, is fundamentally an empirical rather than a theoretical question. We review three empirical methods that have been used to estimate the effects of trade in intermediate inputs and technological change on wages, and summarize the evidence for the U.S. and other countries.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.nber.org/papers/w8372.pdf
Download Restriction: no

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8372.

as
in new window

Length:
Date of creation: Jul 2001
Date of revision:
Publication status: published as Choi, Kwan and James Harrigan (eds.) Handbook of International Trade. Basil Blackwell, 2003.
Handle: RePEc:nbr:nberwo:8372
Note: ITI
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Web page: http://www.nber.org
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Bound, John & Johnson, George, 1992. "Changes in the Structure of Wages in the 1980's: An Evaluation of Alternative Explanations," American Economic Review, American Economic Association, vol. 82(3), pages 371-92, June.
  2. repec:aei:rpbook:52903 is not listed on IDEAS
  3. Görg, Holger, 2000. "Fragmentation and trade : US inward processing trade in the EU," Open Access Publications from Kiel Institute for the World Economy 2491, Kiel Institute for the World Economy (IfW).
  4. Magnus Blomstrom & Gunnar Fors & Robert E. Lipsey, 1997. "Foreign Direct Investment and Employment: Home Country Experience in the United States and Sweden," NBER Working Papers 6205, National Bureau of Economic Research, Inc.
  5. E. Berman & J. Bound & S. Machin, 1997. "Implications of skill-biased technological change: international evidence," LSE Research Online Documents on Economics 20314, London School of Economics and Political Science, LSE Library.
  6. Slaughter, Matthew J., 2001. "International trade and labor-demand elasticities," Journal of International Economics, Elsevier, vol. 54(1), pages 27-56, June.
  7. Haskel, Jonathan & Slaughter, Matthew, 1999. "Trade, Technology and UK Wage Inequality," CEPR Discussion Papers 2091, C.E.P.R. Discussion Papers.
  8. R. E. Baldwin & G. G. Cain, . "Shifts in U.S. Relative Wages: The Role of Trade, Technology, and Factor Endowments," Institute for Research on Poverty Discussion Papers 1132-97, University of Wisconsin Institute for Research on Poverty.
  9. 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.
  10. Anderton, Bob & Brenton, Paul, 1999. "Outsourcing and Low-Skilled Workers in the UK," Bulletin of Economic Research, Wiley Blackwell, vol. 51(4), pages 267-85, October.
  11. Robert E. Lipsey, 1994. "Foreign-Owned Firms and U.S. Wages," NBER Working Papers 4927, National Bureau of Economic Research, Inc.
  12. Gaston, Noel & Trefler, Daniel, 1995. "Union wage sensitivity to trade and protection: Theory and evidence," Journal of International Economics, Elsevier, vol. 39(1-2), pages 1-25, August.
  13. S. Lael Brainard & David A. Riker, 1997. "Are U.S. Multinationals Exporting U.S. Jobs?," NBER Working Papers 5958, National Bureau of Economic Research, Inc.
  14. Robert E. Lipsey, 1999. "Foreign Production by U.S. Firms and Parent Firm Employment," NBER Working Papers 7357, National Bureau of Economic Research, Inc.
  15. 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.
  16. Susan Chun Zhu, 2004. "Trade, product cycles, and inequality within and between countries," Canadian Journal of Economics, Canadian Economics Association, vol. 37(4), pages 1042-1060, November.
  17. 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.
  18. Werner Antweiler & Daniel Trefler, 2000. "Increasing Returns and All That: A View From Trade," NBER Working Papers 7941, National Bureau of Economic Research, Inc.
  19. Bernard, A.B. & Jensen, J.B., 1994. "Exporters, Skill Upgrading, and the Wage Gap," Working papers 94-30, Massachusetts Institute of Technology (MIT), Department of Economics.
  20. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-46, December.
  21. Richard B. Freeman, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer.
  22. 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.
  23. Robertson, Raymond, 2004. "Relative prices and wage inequality: evidence from Mexico," Journal of International Economics, Elsevier, vol. 64(2), pages 387-409, December.
  24. James Harrigan & Rita A. Balaban, 1999. "U.S. wages in general equilibrium: the effects of prices, technology and factor supplies, 1963-1991," Staff Reports 64, Federal Reserve Bank of New York.
  25. Jeffrey D. Sachs & Howard J. Shatz, 1994. "Trade and Jobs in Manufacturing," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1), pages 1-84.
  26. Susan Chun Zhu & Daniel Trefler, 2000. "Beyond the Algebra of Explanation: HOV for the Technology Age," American Economic Review, American Economic Association, vol. 90(2), pages 145-149, May.
  27. Ng, Francis & Yeats, Alexander, 1999. "Production sharing in East Asia : who does what for whom, and why?," Policy Research Working Paper Series 2197, The World Bank.
  28. Lawrence F. Katz & Kevin M. Murphy, 1991. "Changes in Relative Wages, 1963-1987: Supply and Demand Factors," NBER Working Papers 3927, National Bureau of Economic Research, Inc.
  29. Glass, Amy Jocelyn & Saggi, Kamal, 2001. "Innovation and wage effects of international outsourcing," European Economic Review, Elsevier, vol. 45(1), pages 67-86, January.
  30. Jonathan E. Haskel & Matthew J. Slaughter, 2003. "Have Falling Tariffs and Transportation Costs Raised US Wage Inequality?," Review of International Economics, Wiley Blackwell, vol. 11(4), pages 630-650, 09.
  31. Eric J. Bartelsman & Wayne Gray, 1996. "The NBER Manufacturing Productivity Database," NBER Technical Working Papers 0205, National Bureau of Economic Research, Inc.
  32. Bruce A. Blonigen & Matthew J. Slaughter, 2001. "Foreign-Affiliate Activity And U.S. Skill Upgrading," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 362-376, May.
  33. Alan Krueger, 1997. "Labor Market Shifts and the Price Puzzle Revisited," Working Papers 754, Princeton University, Department of Economics, Industrial Relations Section..
  34. Paul Krugman, 1995. "Technology, Trade, and Factor Prices," NBER Working Papers 5355, National Bureau of Economic Research, Inc.
  35. 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.
  36. 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.
  37. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June.
  38. Ulrich R. Kohli, 1978. "A Gross National Product Function and the Derived Demand for Imports and Supply of Exports," Canadian Journal of Economics, Canadian Economics Association, vol. 11(2), pages 167-82, May.
  39. Slaughter, Matthew J., 2000. "Production transfer within multinational enterprises and American wages," Journal of International Economics, Elsevier, vol. 50(2), pages 449-472, April.
  40. Paul, Catherine J Morrison & Siegel, Donald S, 2001. " The Impacts of Technology, Trade and Outsourcing on Employment and Labor Composition," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(2), pages 241-64, June.
  41. David A. Riker & S. Lael Brainard, 1997. "U.S. Multinationals and Competition from Low Wage Countries," NBER Working Papers 5959, National Bureau of Economic Research, Inc.
  42. Robert Gibbons & Lawrence F. Katz, 1989. "Does Unmeasured Ability Explain Inter-Industry Wage Differentials?," NBER Working Papers 3182, National Bureau of Economic Research, Inc.
  43. Robert Z. Lawrence, 1994. "Trade, Multinationals, & Labor," NBER Working Papers 4836, National Bureau of Economic Research, Inc.
  44. Cragg, Michael Ian & Epelbaum, Mario, 1996. "Why has wage dispersion grown in Mexico? Is it the incidence of reforms or the growing demand for skills?," Journal of Development Economics, Elsevier, vol. 51(1), pages 99-116, October.
  45. Zadia Feliciano & Robert E. Lipsey, 1999. "Foreign Ownership and Wages in the United States, 1987 - 1992," NBER Working Papers 6923, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:8372. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.