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Author(s)
Andre Barbe, Dan Kim, David Riker
The pattern of international trade, employment, and wages within the U.S. semiconductor industry shifted significantly during 2006–16. We examine the aggregate trends in these economic variables over this 10-year period, broken into 5-year segments, using detailed data on labor market outcomes by occupation, and data on trade flows by country. China and Vietnam became far more important in U.S. semiconductor trade as both import and export markets. These shifts in trade flows are reflected in the increase in earnings of workers in the U.S. semiconductor industry. Average earnings in the industry rose over the last decade, mostly due to a shift in the workforce to engineers and the technicians that support them. These trends in the semiconductor industry are broadly consistent with the predictions of the model of international trade in tasks found in Grossman and Rossi-Hansberg (2008).
Author(s)
Andre Barbe, David Riker
Recent economic literature views offshoring through the lens of a “trade in tasks” framework. Sources have used this framework to examine four main issues related to offshoring: (1) the relative price, productivity, and net effect of offshoring; (2) the different effects of offshoring for high- and low-skilled workers; (3) the different types of offshoring; and (4) the relative importance of offshoring and technological change. Studies tend to find that low-skill workers are harmed by offshoring, while high-skill workers benefit. Similarly, different types of offshoring have either positive or negative impacts on employment in the home country. As a result of this heterogeneity, when discussing offshoring, economists should be clear about the effects and type of offshoring which they are discussing.
Author(s)
Sarah Oliver
Using data on service occupations in U.S. manufacturing sectors in 2016, this paper seeks to highlight the value of in-house services in U.S. manufacturing output, by assessing the relationship between the share of services occupations in a particular sector (services occupation intensity) and typical education and compensation in service occupations. Overall, this paper finds a positive and significant relationship between services intensity and the typical education level of service workers within sectors, and a positive and significant relationship between service intensity and the average compensation of service occupations across sectors. For U.S. manufacturing sectors, these in-house services represented between $8.7 and $17.5 billion in additional services value added in 2016 compared to $56.8 billion for intermediate services inputs in the same year.
Author(s)
Samira Salem, John Benedetto
On October 4, 2012, the United States International Trade Commission (USITC) hosted a roundtable discussion on the labor market effects of trade. The USITC assembled a group of 29 professionals representing a variety of perspectives and experiences for the roundtable discussion. The participants expressed wide-ranging views on how the business cycle influences the labor market effects of trade liberalization, and on the relationship between offshoring and domestic employment. The discussion highlighted recent methodological advances incorporating transition dynamics to measure the costs that workers face in switching sectors. Participants identified four overarching themes. First, recent empirical research suggests that short-term adjustment costs may be more important than previously thought, so there is a need to incorporate labor mobility into trade models in order to better analyze the effects of trade on labor. Second, research also suggests there is a need for comparative general equilibrium (CGE) modeling efforts to continue to expand into examining trade and labor under conditions of less-than-full employment, as well as to examine the impact on the labor market of reducing nontariff barriers in the services sector. Third, participants called for improved access to data—services data, value-added data, and U.S. firm-level data—and proposed new levels of data analysis, that might allow for research on topics like the possible effects of trade on the quality of jobs.
Author(s)
Maksim Belenkiy, David Riker
In this article, we review recent theoretical and empirical studies that link international trade flows and trade policies to aggregate (economy-wide) unemployment rates. The theoretical models demonstrate that there is a complex and often ambiguous relationship between trade and unemployment: whether trade increases or reduces unemployment rates depends in a complicated way on the industry composition of a country’s output and on differences in labor market frictions across industries and countries. The empirical studies, on the other hand, offer a story that is simpler and fairly consistent: they generally find that an expansion in international trade reduces a country’s aggregate unemployment rate in the long run.
Author(s)
David Riker, William Swanson
In this article, we survey prominent recent empirical studies that explain why labor markets adjust slowly after a country reduces its barriers to trade. The models that we cover are technically complex: they simulate the economy-wide transitions that result from the employment decisions of individual workers who face costs of moving between sectors, loss of the usefulness of their sector-specific experience, and many types of uncertainty. The adjustment costs in the models vary across types of workers, and the speed of adjustment varies across the countries studied and the modeling assumptions adopted. We present these technical models in a relatively nontechnical way. We summarize the similarities and differences in the assumptions and findings of the different economic studies.
Author(s)
Tamar Khachaturian, David Riker
We analyze trade in services using the economic model in Helpman, Melitz, and Yeaple (2004), which features multiple modes of supply and firm heterogeneity. We calibrate the model to the U.S. markets for architectural and engineering services and legal services, and then we estimate the economic impact of reducing fixed costs of supplying U.S. markets for these two types of professional services through cross-border trade and, alternatively, through affiliate transactions. Among other results, we estimate that reducing the fixed costs of trade in these professional services by half would have large effects on the value of cross-border imports into the U.S. market and on foreign affiliate sales in the U.S. market, but would have only small effects on the sales of domestic producers and on overall prices of the services in the U.S. market.
Author(s)
Samira Salem, Fina Rozental
Over the last two decades, labor standards have become a major issue in international trade. Three developments mark the rise of this issue: first, an international consensus was reached on a set of core labor standards established by the International Labour Organization (ILO); second, bilateral and regional trade agreements have increasingly included more labor standards provisions; and third, consumers have increasingly demanded products produced under better labor conditions. This study evaluates research on the effects of labor standards commitments on labor conditions; the influence of trade openness on labor conditions; and the impact of compliance with labor standards on trade performance.
The research suggests that the ratification of ILO conventions does not result in improved labor conditions. On the other hand, research appears to show that agreements, when reinforced by factors such as enforcement mechanisms, positive incentives, and market forces, may improve compliance with labor standards, bringing about better labor conditions. Another line of research suggests that trade openness may improve rather than degrade labor conditions. Finally, the research finds no clear evidence that countries can improve their trade performance by maintaining poor labor conditions, contrary to the “race to the bottom” point of view.
Author(s)
Greg Linden, Jason Dedrick, Kenneth L. Kraemer
Globalization skeptics argue that the benefits of globalization, such as lower consumer prices, are outweighed by job losses, lower earnings for U.S. workers, and a potential loss of technology to foreign rivals. To shed light on the jobs issue, we analyze the iPod, which is manufactured offshore using mostly foreign-made components. In terms of headcount, we estimate that, in 2006, the iPod supported nearly twice as many jobs offshore as in the United States. Yet the total wages paid in the United States amounted to more than twice as much as those paid overseas. Driving this result is the fact that Apple keeps most of its research and development (R&D) and corporate support functions in the United States, providing thousands of high-paid professional and engineering jobs that can be attributed to the success of the iPod. This case provides evidence that innovation by a U.S. company at the head of a global value chain can benefit both the company and U.S. workers.