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

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.

Productivity Measurement and the Impact of Trade and Technology on Wages: Estimates for the U.S., 1972-1990

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 on 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 most 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.

Foreign Direct Investment and Relative Wages: Evidence from Mexico's Maquiladoras

In this paper, we examine the increase in the relative wages of skilled workers in Mexico during the 1980s. We argue that rising wage inequality in Mexico is linked to capital inflows from abroad. The effect of these capital inflows, which correspond to an increase in outsourcing by multinationals from the United States and other Northern countries, is to shift production in Mexico towards relatively skill-intensive goods thereby increasing the relative demand for skilled labor. We study the impact of foreign direct investment (FDI) on the share of skilled labor in total wages in Mexico using state-level data on two-digit industries from the Industrial Census for the period 1975 to 1988. We measure the state- level growth in FDI using data on the regional activities of foreign- owned assembly plants. We find that growth in FDI is positively correlated with the relative demand for skilled labor. In the regions where FDI has been most concentrated, growth in FDI can account for over 50 percent of the increase in the skilled labor share of total wages that occurred during the late 1980s.

Intermediaries in Entrepot Trade: Hong Kong Re-Exports of Chinese Goods

In this paper, we examine Hong Kong's role in intermediating trade between China and the rest of the world. Hong Kong distributes a large fraction of China's exports. Net of customs, insurance, and freight charges, re-exports of Chinese goods are much more expensive when they leave Hong Kong than when they enter. Hong Kong markups on re-exports of Chinese goods are higher for differentiated products, products with higher variance in export prices, products sent to China for further processing, and products shipped to countries which have less trade with China. These results are consistent with quality-sorting models of intermediation and with the outsourcing of production tasks from Hong Kong to China. Additional results suggest that Hong Kong traders price discriminate across destination markets and use transfer pricing to shift income from high-tax countries to Hong Kong.

Interview with Robert D. Hanson, October 2, 1998

Robert D. Hanson, son of Gettysburg College President Henry W.A. Hanson, was interviewed on October 2, 1998 by Michael J. Birkner & David Hedrick. He discusses his father\u27s presidency, and what it was like to grow up in Gettysburg College\u27s White House. He also describes his experience as a student in the class of 1939--what it was like to be the son of the president as a student, fraternity life, academics, and his service in World War II. Length of Interview: 134 minutes Collection Note: This oral history was selected from the Oral History Collection maintained by Special Collections & College Archives. Transcripts are available for browsing in the Special Collections Reading Room, 4th floor, Musselman Library. GettDigital contains the complete listing of oral histories done from 1978 to the present. To view this list and to access selected digital versions please visit -- http://gettysburg.cdmhost.com/cdm/landingpage/collection/p16274coll

Ownership and Control in Outsourcing to China: Estimating the Property-Rights Theory of the Firm

In this paper, we develop a simple model of international outsourcing and apply it to processing trade in China. We observe China's processing exports broken down by who owns the plant and by who controls the inputs the plant processes. Multinational firms engaged in export processing in China tend to split factory ownership and input control with managers in China: the most common outcome is to have foreign factory ownership but Chinese control over input purchases. To account for this organizational arrangement, we appeal to a property-rights model of the firm. Multinational firms and the Chinese factory managers with whom they contract divide the surplus associated with export processing by Nash bargaining. Investments in input search, production, and marketing are partially relationship specific. In our benchmarks estimates, this relationship specificity is lowest in southern coastal provinces, where export markets are thickest, and highest in interior and northern provinces. The probability contracts are enforced has a similar pattern and is the lowest along the southern coast and the highest in the north.

Objective Decision Making in Lonergan and Dworkin

Critical Legal Scholars argue that judges are unable to make truly objective decisions. This view gained strength in 2000 in Bush v. Gore, when the U.S. Supreme Court decided the presidential election largely along partisan lines. This Note, however, argues that Critical Legal Scholars fail to provide positive, constructive answers to the problems of objective decision making. Alternatively, the Note examines these problems through the philosophies of Bernard Lonergan and Ronald Dworkin. The Note explains both philosophers\u27 approaches to objective decision making, then examines those approaches in the context of Bush v. Gore. The Note concludes that Lonergan\u27s philosophy, though not designed specifically for legal thinking, provides the stronger means for understanding and achieving objective judicial decision making

A NORTHEAST BORROWER TRAINING PROGRAM: EVOLUTION AND IMPACTS

A financial training program designed by Cooperative Extension specialists was provided to over 2,000 USDA/FSA borrowers from the Northeast during the period 1994-1999. Key to the success of the workshops was an in-depth, user-friendly curriculum that evolved over time, eventually replacing satellite-feed instruction with pre-taped videos. Cluster analysis classified nearly 70 percent of workshop participants as "Low Finance Priority" or "Low Finance Knowledge." Farmers in these clusters received a relatively greater educational benefit from the program than those not in these clusters.. Impact analysis indicated that perceived annual gain in farm net worth from application of workshop tools ranged from approximately $5,000 to$10,000. The training addressed the needs of producers typically isolated from Cooperative Extension because the workshop was the only extension program attended that year by nearly two-thirds of them.agricultural finance, workshop methods, borrower training, cluster analysis, impact analysis, Agricultural Finance, Teaching/Communication/Extension/Profession,

OFFSHORE ASSEMBLY FROM THE UNITED STATES: PRODUCTION CHARACTERISTICS OF THE 9802 PROGRAM

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.