US Trade and Wages: The Misleading Implications of Conventional Trade Theory

Conventional trade theory, which combines the Heckscher-Ohlin theory and the Stolper- Samuelson theorem, implies that expanded trade between developed and developing countries will increase wage equality in the former. This theory is widely applied. It serves as the basis for estimating the impact of trade on wages using two-sector simulation models and the net factor content of trade. It leads naturally to the presumption that the rapid growth and declining relative prices of US manufactured imports from developing countries since the 1990s have been a powerful source of increased US wage inequality. In this study we present evidence that suggests the presumption is not warranted. We highlight the sensitivity of conventional theory to the assumption of incomplete specialization and find evidence that is not consistent with it. Since 1987, although US domestic relative effective prices in industries with relatively high shares of manufactured goods imports from developing countries have declined, effective unskilled-worker weighted prices have actually risen relative to skilled- worker-weighted prices. If anything this suggests pressures for increased wage equality. Also in apparent contradiction to theory, the (six-digit NAICS) US manufacturing industries with high shares of manufactured imports from developing countries are actually more skill-intensive than the industries with high shares of imports from developed countries. Finally, applying a two-stage regression procedure, we find that developing country import price changes have not mandated increased US wage equality. While these results conflict with standard theory, they are easily explained if the US and developing countries have specialized in products and tasks that are imperfect substitutes. If this is the case, the impact of increased trade with developing countries on US wage inequality is far more muted than standard theory suggests. Also methodologies such as the net factor content of trade using US production coefficients and simulation models assuming perfect substitution between imports and domestic products could be highly misleading.

SACU tariff policies: Where should they go from here?

This paper characterizes the current SACU tariff structure, considers its rationale, proposes and evaluates some alternatives and offers some suggestions for reforming the SACU revenue sharing formula and regional trade strategy. While considerable progress was made until recently in liberalizing and simplifying SACU’s tariff structure, over the past few years such movement appears to have halted. This is unfortunate because, as the paper demonstrates, the tariff structure remains excessively complex, and opaque, continues to taxes exports and provides sectors with very disparate amounts of protection. The differentiation appears mainly to be the result of historical accident and does not appear to be justifiable as efficient job preservation, equitable income distribution or on infant industry grounds. Several alternative tariff structures that use just one or two tariff bands are explored. We demonstrate that it is possible simultaneously to provide benefits to consumers, limit employment dislocation, confer a reasonable degree of effective protection, particularly on finished goods, reduce export taxes, improve transparency and provide a norm against which industrial policy priorities can be set. A major reform of SACU tariffs would also provide the opportunity to renegotiate the SACU revenue-sharing formula, more clearly and rationally separating its aid and tariff-revenue sharing components. The paper also advocates that SACU place primary reliance on free trade agreements rather than new customs unions in its dealing with other trading partners.Trade policy; South African Customs Union; Liberalisation

Planning and state housing : a thesis presented in partial fulfilment of the requirements for the degree of Master of Arts in Geography at Massey University

Within the framework of the comparison of planning theory and practice, the thesis explores the implications of the statement that the planning process of the Housing Division, Ministry of Works (now part of the Housing Corporation) for its residential subdivisions , is not one based on a theoretically rational model but on a series of ad hoc decisions, framed by current government policy or lack of policy and derived from the accummulated experience of the personnel involved. Chapter One investigates the theoretical models of the planning process including comprehensive, structure, advocacy and systems-approach planning and theories which are more closely related to the actual practic of organisations and personnel involved in planning and decision-making. The planning and subdivision development operations of the Housing Division are described in Chapter Two where it is identified that within the planning role there are no formal steps corresponding to a comprehensive-rational model, nor, if the advocacy approach is followed is there evidence of a comprehensive understanding of the wants and desires of the underprivileged populace the Division is housing. Housing Division staff were administered an informal questionnaire on the planning of State house subdivisions which confirmed that a development process aimed at constructing a number of houses within an annual programme is adhered to, rather than a planning process. The planning and development by the Housing Division of the Sherriff Block, Gisborne, is used as a case study, showing a lack of goal and objective formation and feedback of information and a similarity with an incremental decision-making process. Chapter Three makes a tentative assessment of a State house subdivision, namely, the Sherriff Block, Gisborne. Based on a questionnaire of the residents, comparison of the characteristics of the Sherriff Block is made with other research on State housing and some of the factors affecting satisfaction with living in the Block are presented. Housing, shopping, educational and recreational facilities are examined and the process of residential development is outlined. The conclusion further defines problem areas in State housing, notes recent developments and suggests greater use of structured planning units and the adoption of a comprehensive-rational planning process

AGOA Rules: The Intended and Unintended Consequences of Special Fabric Provisions

Lesotho and other least developed African countries responded impressively to the preferences they were granted under the African Growth and Opportunities Act with a rapid increase in their clothing exports to the US. But this performance has not been accompanied by some of the more dynamic growth benefits that might have been hoped for. In this study we develop the theory and present empirical evidence to demonstrate that these outcomes are the predictable consequences of the manner in which the specific preferences might be expected to work. The MFA (Multi-fiber Arrangement) quotas on US imports of textiles created a favorable environment for low value-added, fabric-intensive clothing production in countries with unused quotas by inducing constrained countries to move into higher quality products. By allowing the least developed African countries to use third country fabrics in their clothing exports to the US, AGOA provided additional implicit effective subsidies to clothing that were multiples of the US tariffs on clothing imports. Taken together, these policies help account for the program's success and demonstrate the importance of other rules of origin in preventing poor countries from taking advantage of other preference programs. But the disappointments can also be attributed to the preferences because they discouraged additional value-addition in assembly and stimulated the use of expensive fabrics that were unlikely to be produced locally. When the MFA was removed, constrained countries such as China moved strongly into precisely the markets in which AGOA countries had specialized. Although AGOA helped the least developed countries withstand this shock, they were nonetheless adversely affected. Preference erosion due to MFN reductions in US clothing tariffs could similarly have particularly severe adverse effects on these countries.

Do Developed and Developing Countries Compete Head to Head in High Tech?

Concerns that (1) growth in developing countries could worsen the US terms of trade and (2) that increased US trade with developing countries will increase US wage inequality both implicitly reflect the assumption that goods produced in the United States and developing countries are close substitutes and that specialization is incomplete. In this paper we show on the contrary that there are distinctive patterns of international specialization and that developed and developing countries export fundamentally different products, especially those classified as high tech. Judged by export shares, the United States and developing countries specialize in quite different product categories that, for the most part, do not overlap. Moreover, even when exports are classified in the same category, there are large and systematic differences in unit values that suggest the products made by developed and developing countries are not very close substitutes-developed country products are far more sophisticated. This generalization is already recognized in the literature but it does not hold for all types of products. Export unit values of developed and developing countries of primary commodity-intensive products are typically quite similar. Unit values of standardized (low-tech) manufactured products exported by developed and developing countries are somewhat similar. By contrast, the medium- and high-tech manufactured exports of developed and developing countries differ greatly. This finding has important implications. While measures of across product specialization suggest China and other Asian economies have been moving into high-tech exports, the within-product unit value measures indicate they are doing so in the least sophisticated market segments and the gap in unit values between their exports and those of developed countries has not narrowed over time. These findings shed light on the paradoxical finding, exemplified by computers and electronics, that US-manufactured imports from developing countries are concentrated in US industries, which employ relatively high shares of skilled American workers. They help explain why America’s nonoil terms of trade have improved and suggest that recently declining relative import prices from developing countries may not produced significant wage inequality in the United States. Finally they suggest that inferring competitive trends based on trade balances in products classified as "high tech" or "advanced" can be highly misleading.Terms of Trade, Technology

Manufacturing Wage Dispersion: An End Game Interpretation

macroeconomics, manufacturing, wage dispersion, cyclical swings

US Trade and Wages: The Misleading Implications of Conventional Trade Theory

Conventional trade theory, which combines the Heckscher-Ohlin theory and the Stolper-Samuelson theorem, implies that expanded trade between developed and developing countries will increase wage equality in the former. This theory is widely applied. It serves as the basis for estimating the impact of trade on wages using two-sector simulation models and the net factor content of trade. It leads naturally to the presumption that the rapid growth and declining relative prices of US manufactured imports from developing countries since the 1990s have been a powerful source of increased US wage inequality. In this study we present evidence that suggests the presumption is not warranted. We highlight the sensitivity of conventional theory to the assumption of incomplete specialization and find evidence that is not consistent with it. Since 1987, although US domestic relative effective prices in industries with relatively high shares of manufactured goods imports from developing countries have declined, effective unskilled worker-weighted prices have actually risen relative to skilled worker-weighted prices. If anything, this suggests pressures for increased wage equality. Also in apparent contradiction to theory, the (six-digit North American Industry Classification System [NAICS]) US manufacturing industries with high shares of manufactured imports from developing countries are actually more skill intensive than the industries with high shares of imports from developed countries. Finally, applying a two-stage regression procedure, we find that developing-country import price changes have not mandated increased US wage inequality. While these results conflict with standard theory, they are easily explained if the United States and developing countries have specialized in products and tasks that are highly imperfect substitutes. If this is the case, the impact of increased trade with developing countries on US wage inequality is far more muted than standard theory suggests. Also methodologies such as the net factor content of trade using US production coefficients and simulation models assuming perfect substitution between imports and domestic products could be highly misleading.Wages, Trade Theory

\u3ci\u3eTomicus Piniperda\u3c/i\u3e (Coleoptera: Scolytidae) Reproduction and Behavior on Scotch Pine Christmas Trees Taken Indoors

Tomicus piniperda, the pine shoot beetle, is an exotic insect that was first found in North America in 1992. A federal quarantine currently restricts movement of pine products, including Christmas trees, from infested to uninfested counties. We conducted a study to determine if T. piniperda would re- produce in Christmas trees that were cut and taken indoors during the Christmas season. Twelve Scotch pine, Pinus sylvestris, Christmas trees infested with overwintering T. piniperda beetles were cut in Indiana in early December 1993 and taken to Michigan. Four trees were dissected immediately, while the other 8 trees were taken indoors, placed in tree stands, and watered regularly. After 4 weeks indoors, 4 trees were dissected, and the other 4 were placed outdoors in Michigan for 7 weeks. Upon dissection, all overwintering sites occurred along the lower trunk within the first 40 em of the soil line; 81% were found within 10 em of the soil line. Adults collected from the 4 trees dissected in December produced viable progeny adults when placed on Scotch pine logs in the laboratory. Overwintering beetles became active and laid eggs in 4 of the 8 trees that had been taken indoors. All adults and progeny found in the 4 trees that had been placed outdoors for 7 weeks during cold January and February temperatures were dead. Overall, T. piniperda can become active and breed in Christmas trees that are cut and taken indoors in December. Tomicus piniperda survival in trees that are discarded outdoors at the end of the Christmas season will depend largely on the prevailing temperatures

A Geometric Effective Nullstellensatz

We present in this paper a geometric theorem which clarifies and extends in several directions work of Brownawell, Kollar and others on the effective Nullstellensatz. To begin with, we work on an arbitrary smooth complex projective variety X, with previous results corresponding to the case when X is projective space. In this setting we prove a local effective Nullstellensatz for ideal sheaves, and a corresponding global division theorem for adjoint-type bundles. We also make explicit the connection with the intersection theory of Fulton and MacPherson. Finally, constructions involving products of prime ideals that appear in earlier work are replaced by geometrically more natural conditions involving order of vanishing along subvarieties. The main technical inputs are vanishing theorems, which are used to give a simple algebro-geometric proof of a theorem of Skoda type, which may be of independent interest.Comment: Introduction expanded, examples added, work of Sombra discusse