Do minimum wages affect economic outcomes beyond low-skill employment? This paper develops a new model with heterogeneous firms under perfect competition in a Heckscher-Ohlin setting to show that a binding minimum wage raises product prices, encourages substitution away from labor, and creates unemployment. It reduces output and exports of the labor intensive good, despite higher prices and, less obviously, selection in the labor (capital) intensive sector becomes stricter (weaker). Exploiting rich regional variation in minimum wages across Chinese prefectures and using Chinese Customs data matched with firm level production data, we find robust evidence in support of causal effects of minimum wage consistent with our theoretical predictions.
{"title":"Trade and Minimum Wages in General Equilibrium: Theory and Evidence","authors":"Xue Bai, A. Chatterjee, K. Krishna, Hong Ma","doi":"10.3386/W24456","DOIUrl":"https://doi.org/10.3386/W24456","url":null,"abstract":"Do minimum wages affect economic outcomes beyond low-skill employment? This paper develops a new model with heterogeneous firms under perfect competition in a Heckscher-Ohlin setting to show that a binding minimum wage raises product prices, encourages substitution away from labor, and creates unemployment. It reduces output and exports of the labor intensive good, despite higher prices and, less obviously, selection in the labor (capital) intensive sector becomes stricter (weaker). Exploiting rich regional variation in minimum wages across Chinese prefectures and using Chinese Customs data matched with firm level production data, we find robust evidence in support of causal effects of minimum wage consistent with our theoretical predictions.","PeriodicalId":426783,"journal":{"name":"PSN: Trade Policy (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130075511","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Since 2013 the Japanese government has actively engaged in Mega-FTA negotiations such as the TPP (Trans-Pacific Partnership), Japan-EU FTA, RCEP (Regional Comprehensive Economic Partnership), and China-Japan-Korea FTA. Particularly, Japan initiated the TPP 11 negotiations in the absence of the U.S., following U.S. President Donald Trump's announcement it would be exiting from the TPP in January 2017, and reached an agreement in principle in November 2017. The Japanese government envisions moving toward the conclusion of a final agreement in early March 2018. This research examines Japan's TPP strategy by focusing on the economic effects of the TPP and Japan's major issues of interest in the TPP agreement.
{"title":"Japan's TPP Strategy","authors":"Gyupan Kim","doi":"10.2139/SSRN.3142498","DOIUrl":"https://doi.org/10.2139/SSRN.3142498","url":null,"abstract":"Since 2013 the Japanese government has actively engaged in Mega-FTA negotiations such as the TPP (Trans-Pacific Partnership), Japan-EU FTA, RCEP (Regional Comprehensive Economic Partnership), and China-Japan-Korea FTA. Particularly, Japan initiated the TPP 11 negotiations in the absence of the U.S., following U.S. President Donald Trump's announcement it would be exiting from the TPP in January 2017, and reached an agreement in principle in November 2017. The Japanese government envisions moving toward the conclusion of a final agreement in early March 2018. This research examines Japan's TPP strategy by focusing on the economic effects of the TPP and Japan's major issues of interest in the TPP agreement.","PeriodicalId":426783,"journal":{"name":"PSN: Trade Policy (Topic)","volume":"12 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-02-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124213267","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper develops a model of international tariff negotiations to study the design of the institutional rules of the GATT/WTO. We embed a multi-sector model of trade between multiple countries into a model of inter-connected bilateral negotiations over tariffs. Using 1990 trade flows and tariff outcomes from the Uruguay Round of GATT/WTO negotiations, we estimate country-sector productivity levels, sector-level productivity dispersion, iceberg trade costs, and country-pair bargaining parameters. We use the estimated model to simulate an alternative institutional setting for multilateral tariff negotiations in which the most-favored-nation requirement is abandoned. We find that abandonment of the most-favored-nation requirement would result in inefficient over-liberalization of tariffs and a deterioration in world-wide welfare relative to the negotiated outcomes in the presence of the most-favored-nation requirement.
{"title":"Quantitative Analysis of Multi-Party Tariff Negotiations","authors":"K. Bagwell, R. Staiger, Ali Yurukoglu","doi":"10.3386/W24273","DOIUrl":"https://doi.org/10.3386/W24273","url":null,"abstract":"This paper develops a model of international tariff negotiations to study the design of the institutional rules of the GATT/WTO. We embed a multi-sector model of trade between multiple countries into a model of inter-connected bilateral negotiations over tariffs. Using 1990 trade flows and tariff outcomes from the Uruguay Round of GATT/WTO negotiations, we estimate country-sector productivity levels, sector-level productivity dispersion, iceberg trade costs, and country-pair bargaining parameters. We use the estimated model to simulate an alternative institutional setting for multilateral tariff negotiations in which the most-favored-nation requirement is abandoned. We find that abandonment of the most-favored-nation requirement would result in inefficient over-liberalization of tariffs and a deterioration in world-wide welfare relative to the negotiated outcomes in the presence of the most-favored-nation requirement.","PeriodicalId":426783,"journal":{"name":"PSN: Trade Policy (Topic)","volume":"255 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128774275","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Sana Ullah, Muhammad Hafeez, Babar Aziz, Haseeb Ahmad
The CPEC, designed to link Pakistan and China through rail and road network including the tunnel, will provide a new era of prosperity in the region. The CPEC will supplement the benefits of both of the nations and side by side provides a new way for regional development benefitting all neighbouring countries coming into the web. Most probably, it will ensure a new dimension to local trade that predicts transportation infrastructure, industrial production units, decreased transportation costs, reduction in inventory cost and improved delivery time. The CPEC will also strengthen the market potential for Pakistan’s exports to China in the field of agricultural products, textile, and minerals. It will further enhance the tourism flow to the Northern regions of the country. Moving ahead, the empirical findings of the study also suggest that various development strategies are emerging in the CPEC context for policymakers to optimize the logistics, transportation, trade decisions.
{"title":"Pakistan-China Regional Trade Potentials in the Light of CPEC","authors":"Sana Ullah, Muhammad Hafeez, Babar Aziz, Haseeb Ahmad","doi":"10.2139/ssrn.3182163","DOIUrl":"https://doi.org/10.2139/ssrn.3182163","url":null,"abstract":"The CPEC, designed to link Pakistan and China through rail and road network including the tunnel, will provide a new era of prosperity in the region. The CPEC will supplement the benefits of both of the nations and side by side provides a new way for regional development benefitting all neighbouring countries coming into the web. Most probably, it will ensure a new dimension to local trade that predicts transportation infrastructure, industrial production units, decreased transportation costs, reduction in inventory cost and improved delivery time. The CPEC will also strengthen the market potential for Pakistan’s exports to China in the field of agricultural products, textile, and minerals. It will further enhance the tourism flow to the Northern regions of the country. Moving ahead, the empirical findings of the study also suggest that various development strategies are emerging in the CPEC context for policymakers to optimize the logistics, transportation, trade decisions.","PeriodicalId":426783,"journal":{"name":"PSN: Trade Policy (Topic)","volume":"210 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116155085","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Bo‐Young Choi, Boram Lee, Sooyoung Lee, Jonghun Pek, Hokyung Bang
Korean Abstract: 교통, 정보통신의 발전과 더불어 FTA를 포함한 각국의 서비스산업 개방정책으로 인하여 전 세계적으로 서비스무역이 확대되고 있다. 한ㆍ중ㆍ일 3국의 서비스무역 역시 증가 추세에 있으나 선진국에 비해 그 규모가 주요 지표 대비 작을 뿐만 아니라, 상품수지에서는 막대한 흑자를 누리고 있는 반면 서비스수지는 모두 적자를 보이고 있다. 이러한 가운데 한ㆍ중ㆍ일 3국은 모두 새로운 성장동력으로서 서비스산업의 중요성을 인식하고, 규제 완화를 포함한 서비스업 육성정책과 특구 및 FTA를 활용한 대외개방정책을 시행하고 있다. 이에 본 보고서에서는 한ㆍ중ㆍ일 3국의 서비스무역을 제한하는 규제요인을 분석하고, 이러한 분석을 통해 3국간 서비스무역 활성화를 위한 방안을 도출하고자 한다.
English Abstract: There has been an increasing trend in services trade due to technological development in ICT, transportation in addition to the international trade liberalization efforts. Although Korea, China and Japan has also experienced an increase in its services trade, the share of trade in services out of GDP remains small compared to that of developed countries. Meanwhile, as the importance of the service industry as a new growth engine is widely recognized in the three countries, each country has been actively implementing policies to promote the service industry, including deregulation and open-door policies utilizing the Special Economic Zones and FTAs. Thus, in this report, we analyze the regulatory factors that restrict the service trade of Korea, China and Japan and derive implications for Korea to enhance competitiveness in services sector by promoting services trade in the three countries.
Korean Abstract:随着交通、信息通讯的发展，由于包括FTA在内的各国服务产业开放政策，全世界范围内的服务贸易正在扩大。韩、中、日三国的服务贸易也呈现增加趋势，但与发达国家相比，其规模小于主要指标，而且在商品收支方面实现巨大顺差，而服务收支均出现逆差。在这种情况下，韩、中、日三国都认识到服务产业作为新的增长动力的重要性，正在实行包括放宽限制规定在内的服务业培育政策和灵活运用特区及FTA的对外开放政策。为此，本报告分析了限制韩、中、日三国服务贸易的规制因素，通过这样的分析，将出台促进三国间服务贸易的方案。英语基础设施:There has been an increasing trend in services trade due to technological development in ICT, transportation in addition to the international trade liberalization efforts。Although Korea, China and Japan has experienced an increase in its services trade, the share of trade in services out of GDP remains small compared to that of developed countries。Meanwhile, as the importance of the service industry as a new growth engine is widely recognized in the three countrieseach country has been actively implementing policies to promote the service industry, including deregulation and open-door policies utilizing the Special Economic Zones and FTAs。Thus in this report, we analyze the regulatory factors that restrict the service trade of Korea，China and Japan and derive implications for Korea to enhance competitiveness in services sector by promoting services trade in the three countries。
{"title":"한ㆍ중ㆍ일의 서비스무역규제 분석 및 정책적 시사점 (An Analysis of Service Trade Regulations in Korea, China and Japan and its Policy Implications)","authors":"Bo‐Young Choi, Boram Lee, Sooyoung Lee, Jonghun Pek, Hokyung Bang","doi":"10.2139/ssrn.3299878","DOIUrl":"https://doi.org/10.2139/ssrn.3299878","url":null,"abstract":"<b>Korean Abstract:</b> 교통, 정보통신의 발전과 더불어 FTA를 포함한 각국의 서비스산업 개방정책으로 인하여 전 세계적으로 서비스무역이 확대되고 있다. 한ㆍ중ㆍ일 3국의 서비스무역 역시 증가 추세에 있으나 선진국에 비해 그 규모가 주요 지표 대비 작을 뿐만 아니라, 상품수지에서는 막대한 흑자를 누리고 있는 반면 서비스수지는 모두 적자를 보이고 있다. 이러한 가운데 한ㆍ중ㆍ일 3국은 모두 새로운 성장동력으로서 서비스산업의 중요성을 인식하고, 규제 완화를 포함한 서비스업 육성정책과 특구 및 FTA를 활용한 대외개방정책을 시행하고 있다. 이에 본 보고서에서는 한ㆍ중ㆍ일 3국의 서비스무역을 제한하는 규제요인을 분석하고, 이러한 분석을 통해 3국간 서비스무역 활성화를 위한 방안을 도출하고자 한다.<br><br><b>English Abstract:</b> There has been an increasing trend in services trade due to technological development in ICT, transportation in addition to the international trade liberalization efforts. Although Korea, China and Japan has also experienced an increase in its services trade, the share of trade in services out of GDP remains small compared to that of developed countries. Meanwhile, as the importance of the service industry as a new growth engine is widely recognized in the three countries, each country has been actively implementing policies to promote the service industry, including deregulation and open-door policies utilizing the Special Economic Zones and FTAs. Thus, in this report, we analyze the regulatory factors that restrict the service trade of Korea, China and Japan and derive implications for Korea to enhance competitiveness in services sector by promoting services trade in the three countries.","PeriodicalId":426783,"journal":{"name":"PSN: Trade Policy (Topic)","volume":"17 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-12-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133431514","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
One of the three preliminary issues for discussion in the Brexit negotiations is Northern Ireland, in particular, the need to avoid damaging the peace process initiated by the Belfast (Good Friday) Agreement. A consequence of that process is the absence of a hard border between Northern Ireland and Ireland which on Brexit will become an external European Union border. Having detailed the nature of Northern Ireland’s trade, this article examines the United Kingdom Government’s Paper on Northern Ireland which suggests that a new customs partnership between the United Kingdom and the European Union, including an exception for the trade of micro, small and medium-sized enterprises, could obviate the need for a return to a hard border. Having examined the Government Paper, this article examines two other possible arrangements, the first of which is a proposal that Northern Ireland accede to the European Economic Area Agreement. This option is then contrasted with a proposal that a Protocol on Trade on the Island of Ireland be concluded. Modelled on Protocol 3 of the original Treaty of Rome which governed trade within Germany, the Protocol would confirm that like the rest of the United Kingdom, Northern Ireland will leave the EU but would allow existing levels of trade and regulatory cooperation between Northern Ireland and Ireland to continue. The Protocol solution could be extended beyond trade so as to afford the EU an opportunity to consolidate its contribution to the peace process in Northern Ireland.
{"title":"Northern Ireland and Brexit: Avoiding a Hard Border – EEA or a Special Protocol?","authors":"J. McMahon","doi":"10.2139/SSRN.3082202","DOIUrl":"https://doi.org/10.2139/SSRN.3082202","url":null,"abstract":"One of the three preliminary issues for discussion in the Brexit negotiations is Northern Ireland, in particular, the need to avoid damaging the peace process initiated by the Belfast (Good Friday) Agreement. A consequence of that process is the absence of a hard border between Northern Ireland and Ireland which on Brexit will become an external European Union border. Having detailed the nature of Northern Ireland’s trade, this article examines the United Kingdom Government’s Paper on Northern Ireland which suggests that a new customs partnership between the United Kingdom and the European Union, including an exception for the trade of micro, small and medium-sized enterprises, could obviate the need for a return to a hard border. Having examined the Government Paper, this article examines two other possible arrangements, the first of which is a proposal that Northern Ireland accede to the European Economic Area Agreement. This option is then contrasted with a proposal that a Protocol on Trade on the Island of Ireland be concluded. Modelled on Protocol 3 of the original Treaty of Rome which governed trade within Germany, the Protocol would confirm that like the rest of the United Kingdom, Northern Ireland will leave the EU but would allow existing levels of trade and regulatory cooperation between Northern Ireland and Ireland to continue. The Protocol solution could be extended beyond trade so as to afford the EU an opportunity to consolidate its contribution to the peace process in Northern Ireland.","PeriodicalId":426783,"journal":{"name":"PSN: Trade Policy (Topic)","volume":"44 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-12-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127753253","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We investigate the effect of investor overconfidence and margin trades on market efficiency around a market crash. We find that the price delay in a pre-crash period is about twice the price delay in a post-crash period. After a market crash, investors become more sensitive to market movements, resulting in small price delay and high price synchronicity. Margin traders not only trade on market trends but also put additional force on it, escalating the pyramiding and de-pyramiding effects caused by the shift in market sentiment. Finally, our results show that negative information travels slowly only when investors are overconfident.
{"title":"Investor Overconfidence, Margin Trade and Market Efficiency: Evidence Based on a Recent Financial Market Crash","authors":"Mingsheng Li, Qian Li, Yan Li","doi":"10.2139/ssrn.3081547","DOIUrl":"https://doi.org/10.2139/ssrn.3081547","url":null,"abstract":"We investigate the effect of investor overconfidence and margin trades on market efficiency around a market crash. We find that the price delay in a pre-crash period is about twice the price delay in a post-crash period. After a market crash, investors become more sensitive to market movements, resulting in small price delay and high price synchronicity. Margin traders not only trade on market trends but also put additional force on it, escalating the pyramiding and de-pyramiding effects caused by the shift in market sentiment. Finally, our results show that negative information travels slowly only when investors are overconfident.","PeriodicalId":426783,"journal":{"name":"PSN: Trade Policy (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-12-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129438034","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this paper, we use a detailed production survey in the Chinese manufacturing industry to estimate both revenue and physical productivity and relate our measurements to firms' trade activity. We find that Chinese exporters for largely export oriented products like leather shoes or shirts appear to be less efficient than firms only involved on the domestic market based on the standard revenue productivity measure. However, we show strong positive export premium when we instead consider physical productivity. The simple and intuitive explanation of our results is that exporters charge on average lower prices. We focus more particularly on the role of processing trade and find that price differences are especially (and probably not surprisingly) large for firms involved in this type of contractual arrangements.
{"title":"Processing Trade, Productivity and Prices: Evidence from a Chinese Production Survey","authors":"Y. Li, F. Warzynski, Valérie Smeets","doi":"10.2139/ssrn.3430310","DOIUrl":"https://doi.org/10.2139/ssrn.3430310","url":null,"abstract":"In this paper, we use a detailed production survey in the Chinese manufacturing industry to estimate both revenue and physical productivity and relate our measurements to firms' trade activity. We find that Chinese exporters for largely export oriented products like leather shoes or shirts appear to be less efficient than firms only involved on the domestic market based on the standard revenue productivity measure. However, we show strong positive export premium when we instead consider physical productivity. The simple and intuitive explanation of our results is that exporters charge on average lower prices. We focus more particularly on the role of processing trade and find that price differences are especially (and probably not surprisingly) large for firms involved in this type of contractual arrangements.","PeriodicalId":426783,"journal":{"name":"PSN: Trade Policy (Topic)","volume":"9 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-11-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125514657","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper seeks to estimate how the impact of nontariff measures (NTMs) on trade can vary across exporter–importer pairs. Covering data for the early 2000s, regressions are run at a disaggregate tariff line level and the estimated results are converted into ad valorem equivalents (AVEs). The results underline the importance of conditioning conclusions on trading partners and products and demonstrate that the same NTM can have different—even opposite—effects across exporting countries. One general pattern that emerges is that low-income importers impose more restrictive NTMs, but that the capacity for exporting countries to address NTMs increases with GDP per capita.
{"title":"Estimating the Bilateral Impact of Nontariff Measures on Trade","authors":"Michael Bratt","doi":"10.1111/roie.12297","DOIUrl":"https://doi.org/10.1111/roie.12297","url":null,"abstract":"This paper seeks to estimate how the impact of nontariff measures (NTMs) on trade can vary across exporter–importer pairs. Covering data for the early 2000s, regressions are run at a disaggregate tariff line level and the estimated results are converted into ad valorem equivalents (AVEs). The results underline the importance of conditioning conclusions on trading partners and products and demonstrate that the same NTM can have different—even opposite—effects across exporting countries. One general pattern that emerges is that low-income importers impose more restrictive NTMs, but that the capacity for exporting countries to address NTMs increases with GDP per capita.","PeriodicalId":426783,"journal":{"name":"PSN: Trade Policy (Topic)","volume":"66 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127659408","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We develop a multi-factor, multi-sector Eaton-Kortum model in order to examine the impact of trade costs, factor endowments, and technology (both Ricardian and factor-augmenting) on factor prices, trade in goods, and trade in the services of primary factors (value-added trade). This framework nests the Heckscher-Ohlin-Vanek (HOV) model and the Vanek factor content of trade prediction. We take the model to the data using skilled and unskilled data for 38 countries. We have two findings. First, the key determinants of international variation in the factor content of trade are endowments and international variation in factor inputs used per dollar of output. Input-usage variation in turn is driven by (1) factor-augmenting international technology differences and (2) international factor price differences. Second, our estimates of factor-augmenting international technology differences — which imply cross-country variation in skill-biased technologies — are empirically similar to those used to rationalize cross-country evidence on income differences and directed technical change.
{"title":"Endowments, Skill-Biased Technology, and Factor Prices: A Unified Approach to Trade","authors":"Peter M. Morrow, Daniel Trefler","doi":"10.3386/w24078","DOIUrl":"https://doi.org/10.3386/w24078","url":null,"abstract":"We develop a multi-factor, multi-sector Eaton-Kortum model in order to examine the impact of trade costs, factor endowments, and technology (both Ricardian and factor-augmenting) on factor prices, trade in goods, and trade in the services of primary factors (value-added trade). This framework nests the Heckscher-Ohlin-Vanek (HOV) model and the Vanek factor content of trade prediction. We take the model to the data using skilled and unskilled data for 38 countries. We have two findings. First, the key determinants of international variation in the factor content of trade are endowments and international variation in factor inputs used per dollar of output. Input-usage variation in turn is driven by (1) factor-augmenting international technology differences and (2) international factor price differences. Second, our estimates of factor-augmenting international technology differences — which imply cross-country variation in skill-biased technologies — are empirically similar to those used to rationalize cross-country evidence on income differences and directed technical change.","PeriodicalId":426783,"journal":{"name":"PSN: Trade Policy (Topic)","volume":"44 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122664378","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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