We analyze the effect of rising Chinese import competition between 1990 and 2007 on US local labor markets, exploiting cross-market variation in import exposure stemming from initial diffe...

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The China Syndrome: Local Labor Market Effects of Import Competition in the United States

The nature of international trade is changing. For centuries, trade mostly entailed an exchange of goods . Now it increasingly involves bits of value being added in many different locations, or what might be called trade in tasks . Revolutionary advances in transportation and communications technology have weakened the link between labor specialization and geographic concentration, making it increasingly viable to separate tasks in time and space. When instructions can be delivered instantaneously, components and unfinished goods can be moved quickly and cheaply, and the output of many tasks can be conveyed electronically, firms can take advantage of factor cost disparities in different countries without sacrificing the gains from specialization. The result has been a boom in “offshoring” of both manufacturing tasks and other business functions. 1 In this paper, we develop a simple and tractable model of offshoring based on the trade able tasks. We conceptualize production in terms of the many tasks that must be performed by each factor of production. A firm can perform each of the continuum of tasks required for the realization of its product either in close proximity to its headquarters or at an offshore location. Offshoring may be attractive, if some factors can be hired more cheaply abroad than at home, but it also is costly, because remote performance of a task limits the opportunities for monitoring and coordinating workers. 2 To capture this aspect of reality, our model features heterogeneous offshoring costs for the various tasks. In each industry, firms choose the geographic organization

/pdf/trading-tasks-a-simple-theory-of-offshoring-2vstzj3iz1.pdf

Trading Tasks: A Simple Theory of Offshoring

This paper studies the impact of a regional free trade agreement, MERCOSUR, on technology upgrading by Argentinean firms. To guide empirical work, I introduce technology choice in Melitz’s (2003) model of trade with heterogeneous firms. The joint treatment of the technology adoption and exporting choices shows that the increase in revenues produced by trade integration can induce exporters to upgrade technology. An empirical test of the model reveals that firms in industries facing higher reductions in Brazil’s import tariffs increase their investment in technology faster and exporters upgrade technology faster than other firms in the same industry.

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Trade Liberalization, Exports, and Technology Upgrading: Evidence on the Impact of MERCOSUR on Argentinian Firms

This paper documents the pervasiveness of job polarization in 16 Western European countries over the period 1993-2010. It then develops and estimates a framework to explain job polarization using routine-biased technological change and offshoring. This model can explain much of both total job polarization and the split into within- industry and between-industry components.

/pdf/explaining-job-polarization-routine-biased-technological-c6ixfut0wx.pdf

Explaining job polarization: Routine-biased technological change and offshoring

This paper examines the frequency, pervasiveness, and determinants of prod uct switching by US manufacturing firms. We find that one-half of firms alter their mix of five-digit SIC products every five years, that product switching is correlated with both firm- and firm -product attributes, and that product adding and dropping induce large changes in firm scope. The behavior we observe is consistent with a natural generalization of existing theories of industry dynam ics that incorporates endogenous product selection within firms. Our findings suggest that product switching contributes to a reallocation of resources within firms toward their most efficient use. (JEL LI 1, L21, L25, L60) The extent to which resources are allocated to their best use is a core issue of economics. Until now, research into industry dynamics has addressed this issue by focusing almost exclusively on the contribution of firm entry and exit to resource reallocation, that is, whether newly created firms or plants are more productive than the dying firms and plants they replace.1 This paper examines a new, "extensive" margin of firm adjustment, the reassignment of resources that takes place within surviving firms as they add and drop (i.e., "switch") products. Our analysis of product switching makes use of a unique longitudinal dataset that tracks US firms' product-level manufacturing output across quinquennial US Manufacturing Censuses

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Multiple-Product Firms and Product Switching

We employ data that match the population of Danish workers to the universe of private-sector Danish firms, with product-level trade flows by origin- and destination-countries. We document new stylized facts about offshoring and instrument for offshoring and exporting. Within job spells, offshoring increases (decreases) the high-skilled (low-skilled) wage; exporting increases the wages of all skill-types; the net wage-effect of trade varies substantially within the same skill-type; conditional on skill, the wage-effect of offshoring varies across task characteristics. We estimate the overall effects of offshoring on workers’ present and future income streams by constructing pre- offshoring-shock worker-cohorts and tracking them over time. (JEL F14, F16, J24, J31, L24)

/pdf/the-wage-effects-of-offshoring-evidence-from-danish-matched-jt135l0an6.pdf

The Wage Effects of Offshoring: Evidence from Danish Matched Worker-Firm Data

Human Capital and Wages in Exporting Firms

This article investigates the effects of homeownership on labour mobility and unemployment duration. We distinguish between finding employment locally or being geographically mobile. We find that homeownership hampers the propensity to move for job reasons, but improves the chances of finding local jobs, which is in accordance with the predictions from our theoretical model. The overall hazard rate into employment is higher for homeowners, such that there is a negative correlation between homeownership and unemployment duration. Our empirical findings thus contradict the so-called Oswald hypothesis, even if support is found for the main mechanism behind the hypothesis, namely that homeownership hampers mobility.

Jakob Roland Munch

Papers

The Wage Effects of Offshoring: Evidence from Danish Matched Worker-Firm Data

Human Capital and Wages in Exporting Firms

Are homeowners really more unemployed

Costs and benefits of Danish active labour market programmes

Home ownership, job duration, and wages