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Abstract:
There is considerable debate over whether international trade has contributed to the declining economic fortunes of less skilled workers. One issue that has become lost in the current discussion is how firms respond to import competition and how these responses, in turn, are transmitted to the labor market. In previous work, we have argued that outsourcing, by which we mean the import of intermediate inputs by domestic firms, has contributed to an increase in the relative demand for skilled labor in the United States. If firms respond to import competition from low-wage countries by moving non- skill-intensive activities abroad, then trade will shift employment towards skilled workers within industries. In this paper, we extend our previous work by combining new import data from the revised NBER trade database with disaggregated data on input purchases from the Census of Manufactures. We construct industry-by-industry estimates of outsourcing for the period 1972-1990 and reexamine whether outsourcing has contributed to an increase in relative demand for skilled labor. Our main finding is that outsourcing can account for 31-51% of the increase in the relative demand for skilled labor that occurred in U.S. manufacturing industries during the 1980s, compared to our previous estimate of 15-33%.

Abstract:
Feenstra and Kee study the link between export product variety and country productivity based on data from 34 industrial and developing countries, from 1982 to 1997. They measure export product variety by the share of U.S. imports on the set of goods exported by each sampled country relative to the world. It is a theoretically sound index which is consistent with within-country GDP maximization, as well as cross-country comparison. The authors construct country productivity based on relative endowments and product variety. Increases in output product variety improve country productivity as the new mix of output may better use resources of the economy and improve allocative efficiency. Such effects depend on the elasticity of substitution in production between the different varieties. The more different the varieties are in terms of production, the more efficient it is to use the endowments of the economy when a new variety is available, which leads to productivity gains. In addition, as suggested in the literature, export product variety depends on trade costs, such as tariffs, distance, and transport costs. Such trade cost variables are used as instruments to help the authors identify the effects of export variety on country productivity. Empirical evidence supports their hypothesis. Overall, while export variety accounts for only 2 percent of cross-country productivity differences, it explains 13 percent of within-country productivity growth. A 10 percent increase in the export variety of all industries leads to a 1.3 percent increase in country productivity, while a 10 percentage point increase in tariffs facing an exporting country leads to a 2 percent fall in country productivity.

This paper - a product of the Trade Team, Development Research Group - is part of a larger effort in the group to study the link between trade and productivity.

Abstract:
This paper provides evidence on monopolistic competition models with endogenous technology by studying the effects of sectoral export variety on country productivity. The effects are estimated in a translog GDP function system based on data for 34 countries from 1982 to 1997. Country productivity is constructed and export variety is shown to be significant. Instruments such as tariffs, transport costs, and distance are shown to affect country productivity through export variety, and only through this channel. Overall, while export variety accounts for only 2% of cross-country productivity differences, it explains 13% of within-country productivity growth. A 10% increase in the export variety of all industries leads to a 1.3% increase in country productivity, while a 10 percentage point increase in tariffs facing an exporting country leads to a 2% fall in country productivity.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Abstract:
In this paper we examine the reduction in the relative employment and wages of unskilled workers in the U.S. during the 1980's. We argue that a contributing factor to this decline was rising imports reflecting the outsourcing of production activities. In a theoretical model, we show that any increase in the Southern capital stock relative to that of the North, or neutral technological progress in the South, will increase the relative wage of skilled workers in both countries due to a shift in production activities to the South. Corresponding to this change in the relative wage is an increase in the price index of Northern activities within each industry, relative to that of the South. We confirm that this change in relative prices occurred for the U.S. and other industrialized countries relative to their trading partners. We also estimate that 15-33% of the increase in the relative wage of nonproduction (or skilled) workers in the U.S. during the 1980's is explained by rising imports.

Abstract:
We document a set of bilateral trade data by commodity for 1962-2000, which is available from nber.org/data (International Trade Data, NBER-UN world trade data). Users must agree not to resell or distribute the data for 1984-2000. The data are organized by the 4-digit Standard International Trade Classification, revision 2, with country codes similar to the United Nations classification. This dataset updates the Statistics Canada World Trade Database as described in Feenstra, Lipsey, and Bowen (1997), which was available for years 1970-1992. In that database, Statistics Canada had revised the United Nations trade data, mostly derived from the export side, to fit the Canadian trade classification and in some cases to add data not available from the export reports. In contrast, in the new NBER-UN dataset we give primacy to the trade flows reported by the importing country, whenever they are available, assuming that these are more accurate than reports by the exporters. If the importer report is not available for a country-pair, however, then the corresponding exporter report is used instead. Corrections and additions are made to the United Nations data for trade flows to and from the United States, exports from Hong Kong and China, and imports into many other countries.

Abstract:
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.

Abstract:
From its inception, the Penn World Tables (PWT), building on the International Comparisons Program (ICP)of the United Nations, has sought to compare the standard of living of individuals in different countries. That is, the termreal GDP per capitaas reported in the PWT is intended to represent the ability to purchase goods and services by a representative agent in the economy. The same is true of benchmark comparisons as published by the United Nations, Eurostat, or OECD. But this expenditure-side interpretation of real GDP is quite different from the uses to which benchmark ICP and PWT data are frequently applied, such as in growth regressions, wherereal GDPis intended to reflect the production side of the economy. In this paper the authors propose a new approach to international comparisons of real GDP measured from the output side. They modify the traditional Gary-Khamis system, which measures real GDP from the expenditure side using real domestic expenditure, to include differences in the terms of trade between countries. The analysis shows that this system has a strictly positive solution under mild assumptions. On the basis of a set of domestic final output, import, and export prices and values for 151 countries in 1996, differences between real GDP measured from the expenditure and output side can be substantial, especially for small open economies.

Economic Theory & Research, Markets and Market Access, Free Trade, Access to Markets, Trade Policy

Abstract:
In this paper we propose a new approach to international comparisons of real GDP measured from the output-side. The traditional Geary-Khamis system to measure real GDP from the expenditure-side is modified to include differences in the terms of trade between countries. It is shown that this system has a strictly positive solution under mild assumptions. On the basis of a set of domestic final output, import and export prices and values for 14 European countries and the U.S. it is shown that differences between real GDP measured from the expenditure and output-side can be substantial, especially for small open economies.

Abstract:
This paper generates persistent effects of a monetary disturbance in the context of staggered price-setters. Previous research has been restricted by the CES functional form to price-setting rules that are constant markups over marginal costs. The present paper considers a translog form for preferences and an input-output structure for production in the context of a dynamic general equilibrium model of monopolistically competitive staggered price-setters. We derive a price-setting rule that is a function of marginal cost and also competitors' prices. This rule better captures the interaction of price-setters envisioned in Taylor (1980) and Blanchard (1983) in their early work on staggered contracts. The model is able to generate reasonable persistence, and also confirms the conjecture of Taylor and Blanchard that increasing the number of contracting groups increases the degree of persistence.

Abstract:
This paper generates persistent effects of a monetary disturbance in the context of staggered price-setters. Previous research has been restricted by the CES functional form to price-setting rules that are constant markups over marginal costs. The present paper considers a translog form for preferences and an input-output structure for production in the context of a dynamic general equilibrium model of monopolistically competitive staggered price-setters. We derive a price-setting rule that is a function of marginal cost and also competitors' prices. This rule better captures the interaction of price-setters envisioned in Taylor (1980) and Blanchard (1983) in their early work on staggered contracts. The model is able to generate reasonable persistence and also confirms the conjecture of Taylor and Blanchard that increasing the number of contracting groups increases the degree of persistence.

Abstract:
This paper describes two databases dealing with world bilateral trade flows: the World Trade Database (WTDB) assembled by Statistics Canada, which contains bilateral trade flows for all countries over 1970-1992, classified according to the Standard International Trade Classification, Revision 2 (with some modification); and the Compatible Trade and Production (COMTAP) database assembled by the Organization for Economic Cooperation and Development (OECD), which contains production of manufactured goods in OECD countries and bilateral trade flows between these countries and all their trading partners over 1970-1985, classified according to the International Standard Industrial Classification, Revision 2. These databases are available to academic users on the CD-ROM. Also contained on the CD-ROM is information on country factor endowments, tariff and non-tariff barriers for selected countries, and input-output tables for the United Kingdom and the United States. The WTDB database is made available under a license with Statistics Canada, the terms of which are described herein, and the COMTAP database is made available by permission of the OECD.

A revised version of this data set is available on CD-ROM.

Abstract:
This paper has two aims. The first is to reduce the range within which the true U.S.-China bilateral trade deficit lies. The second is to identify the determinants of the bilateral trade deficit and offer an assessment of their relative importance. We calculate a smaller range of values for the bilateral trade deficit than in previous studies, due to a new estimation method that takes advantage of our access to detailed Chinese Customs data at the commodity level. For example, the revised US-China bilateral trade deficit is $15 billion to $20 billion in 1994, and $16 billion to $22 billion in 1995, compared to the official range of $8 billion to $30 billion, and $9 billion to $34 billion, respectively. The widening of the US-CHINA bilateral trade deficit in recent years reflected many factors. In our opinion, the two chief factors are (i) macroeconomic forces in the US and China moving in opposite direction, causing their respective overall trade balance to move in opposite directions; and (ii) the accelerated relocation of production of US imports from East Asia to China.

Abstract:
Over the last three decades, the value of Chinese trade has approximately doubled every four years. This rapid growth has transformed the country from a negligible player in world trade to the world's second largest exporter, as well as a substantial importer of raw materials, intermediate inputs, and other goods. This paper provides an overview of the microstructure of Chinese trade, its macroeconomic implications, trade disputes with other WTO member countries, and the role of foreign firms.

Abstract:
While outsourcing of production from the U.S. to Mexico has been hailed in Mexico as a valuable engine of growth, recently there have been misgivings regarding its fickleness and volatility. This paper is among the first in the trade literature to study the second moment properties of outsourcing. We begin by documenting a new stylized fact: the maquiladora outsourcing industries in Mexico experience fluctuations in value added that are roughly twice as volatile as the corresponding industries in the U.S. A difference-in-difference method is extended to second moments to verify the statistical significance of this finding. We then develop a stochastic model of outsourcing with heterogeneous firms that can explain this volatility. The model employs two novel mechanisms: an extensive margin in outsourcing which responds endogenously to transmit shocks internationally, and translog preferences which modulate firm entry.

Abstract:
This paper describes the updating of the NBER trade dataset, which now provides U.S. import and export values to the year 2001, disaggregated by Harmonized System (HS), Standard International Trade Classification (SITC), and the U.S. Standard Industrial Classification (SIC) categories. In addition, U.S. tariff data at the HS level have been added for the years 1989-2001. Earlier CD-ROMs distributed by the NBER described data on U.S. imports and exports from 1972-1994, and these values have been slightly modified for 1989-1994 and then updated to 2001. Together with the earlier data, there are now 30 years of disaggregate U.S. trade data available to researchers. These data, along with the tariff information for 1989-2001, are all available over the internet at the NBER web site.

Abstract:
In this paper, we examine the changes in per-capita income and productivity from 1700 to modern times, and show four things: (1) that incomes per capita diverged more around the world after 1800 than before; (2) that the source of this divergence was increasing differences in the efficiency of economies; (3) that these differences in efficiency were not due to problems of poor countries in getting access to the new technologies of the Industrial Revolution; (4) that the pattern of trade from the late nineteenth century between the poor and the rich economies suggests that the problem of the poor economies was peculiarly a problem of employing labor effectively. This continues to be true today.

Abstract:
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.

Abstract:
We view the political process in China as trading off the social benefits of increased trade and foreign direct investment, against the losses incurred by state-owned enterprises due to such liberalization. A model drawing on Grossman and Helpman (1994, 1996) is used to derive an empirically estimable government objective function. The key structural parameters of this model are estimated using province-level data on foreign direct investment and trade flows in China, over the years 1984-1995. We find that the weight applied to consumer welfare is between one-fifth and one-twelfth of the weight applied to the output of state-owned enterprises. We find that governmental preferences have shifted over time, but even in recent periods the weight on consumer welfare is only one-half of the weight on state-owned enterprises. This suggests that China may find it politically difficult to follow through with liberalizing its trade and investment regimes, such as under its WTO accession proposal.

Abstract:
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.

Abstract:
This paper reviews empirical methods used to estimate the impact of trade policies under imperfect competition. We decompose the welfare effects of trade policy into four possible channels: (i) a deadweight loss from distorting consumption and production decisions; (ii) a possible gain from improving the terms of trade; (iii) a gain or loss due to changes in the scale of firms; and, (iv) a gain or loss from shifting profits between countries. For each channel, we discuss the appropriate empirical methods to determine the sign or magnitude of the effect, and illustrate the results using recent studies. Two other channels by which trade policy affects social or individual welfare - through changes in wages and changes in product variety - are discussed more briefly. Recent developments in the analysis of trade policies under perfect competition are also reviewed.

Abstract:
This paper argues that the theoretical foundations for the gravity equation are general, while the empirical performance of the gravity equation is specific to the type of goods examined. Most existing theory for the gravity equation depends on the assumption of differentiated goods. We show that the gravity equation can also be derived from a reciprocal dumping' model of trade in homogeneous goods. The different theories have different testable implications. Theoretically, the gravity equation should have a lower domestic income elasticity for exports of homogeneous goods than of differentiated goods, because of a home market' effect which depends on barriers to entry. We quantify the home market effect empirically using cross-sectional gravity equations, and find that domestic income export elasticities are indeed substantially higher for differentiated goods than for homogeneous goods.

Abstract:

Abstract:
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.

Abstract:
The CES monopolistic competition model is an especially convenient way to derive the gravity equation, especially when we allow for transport costs and other trade barriers. In that case, we need to take account of the overall price indexes in each country. We review three methods to do so: using published data on price indexes; using the computational method of Anderson and van Wincoop; or using country fixed effects to measure the price indexes. The latter two methods are compared on the dataset dealing with trade between and within Canada and the US. The fixed effects method produces consistent estimates of the average border effect across countries, and is simple to implement, so it might be considered to be the preferred estimation method.

Abstract:
The purpose of this paper is to identify conditions under which hedonic price indexes provide an exact measure of consumer welfare. Our results provide a rationale for existing practices in the case where prices equal marginal costs. In that case, both the marginal value of characteristics and a fixed-weight price index can be estimated from a hedonic regression. Using the marginal value of characteristics, we show how to construct bounds on the exact hedonic price index. When prices are above marginal costs then our bounds still apply, but the value of characteristics cannot be measured so easily. Since the price-cost markups are an omitted variable in the hedonic regression, they will bias the coefficients obtained. For a special class of utility functions, we argue that a linear regression will still provide a measure of the marginal value of characteristics, but a log-linear regression will overstate these values.

Abstract:
We consider trade between two countries of unequal size, where
the creation of new intermediate inputs occurs in both. We
assume that the knowledge gained from R&D in one country does
not spillover to the other. Under autarky, the larger country
would have a higher rate of product creation. When trade occurs
in the final goods, we find that the smaller country has its rate
of product creation slowed, even in the long run. In contrast,
the larger country enjoys a temporary increase in its rate of
R&D. We also examine the welfare consequences of trade in the
final goods, which depend on whether the intermdiate inputs are
traded or not.

Abstract:
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.

Abstract:
In this paper, we examine Hong Kong's role in intermediating trade between China and the rest of the world. Hong Kong traders distribute 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, and products sent to China for further processing. These results are consistent with the view that traders resolve informational problems in exchange. Additional results suggest that traders price discriminate across destination markets and use transfer pricing to shift income from high-tax countries to Hong Kong.

Abstract:
We examine how exchange rate volatility affects exporter's pricing decisions in the presence of optimal forward covering. By taking account of forward covering, we are able to derive an expression for the risk premium in the foreign exchange market, which is then estimated as a generalized ARCH model to obtain the time-dependent variance of the exchange rate. Our theory implies a connection between the estimated risk premium equation, and the influence of exchange rate volatility on export prices. In particular, we argue that if there is no risk premium, then exchange rate variance can only have a negative impact on export prices. In the presence of a risk premium, however, the effect of exchange rate variance on export prices is ambiguous, and may be statistically insignificant with aggregate data. These results are supported using data on aggregate U.S. imports and exchange rates of the dollar against the pound, yen and mark.

Abstract:
We propose an economic model of business groups that allows for the cooperative behavior of groups of firms, where the number and size of each group is determined endogenously. In this framework, more than one configuration of groups can arise in equilibrium: several different types of business groups can occur, each of which is consistent with profit-maximization and is stable. This means that the economic logic does not fully determine the industrial structure, leaving scope for political and sociological factors to have a lasting influence. In a companion paper, we argue that the differing structures of business groups found in South Korea, Taiwan and Japan fit the stylized results from the model, and contrast the impact of these groups on the product variety of their country exports to the United States.

Abstract:
We propose an economic model of business groups that allows for the cooperative behavior of groups of firms, where the number and size of each group is determined endogenously. In this framework, more than one configuration of groups can arise in equilibrium: several different types of business groups can occur, each of which are consistent with profit-maximization and are stable. This means that the economic logic does not fully determine the industrial structure, leaving scope for political and sociological factors to have a lasting influence. In a companion paper, we argue that the differing structures of business groups found in South Korea, Taiwan and Japan fit the stylized results from the model, and contrast the impact of these groups on the product variety of their country exports to the United States.

Abstract:
In this paper we study the effect of market structure on the trade performance of South Korea, Taiwan, and Japan. We center our analysis on Korea and Taiwan, countries which have very different market structures: Korea has many large, vertically-integrated business groups known as chaebol, whereas business groups in Taiwan are smaller and horizontally-integrated in the production of intermediate inputs. The exports of these countries to the United States are compared using indexes of product variety and 'product mix', which are constructed at the 5-digit industry level. It is found that Taiwan tends to export a greater variety of products to the U.S. than Korea, and this holds across nearly all industries. In addition, Taiwan exports relatively more high-priced intermediate inputs, whereas Korea exports relatively more high-priced final goods. We argue that these results confirm the importance of market structure as a determinant of trade patterns.

Abstract:
Dooley et al (2003, 2004a,b,c) argue that China seeks to raise urban employment by 10-12 million persons per year, with about 30% of that coming from export growth. In fact, total employment increased by 7.5-8 million per year over 1997-2005. We estimate that export growth over 1997-2002 contributed at most 2.5 million jobs per year, with most of the employment gains coming from non-traded goods like construction. Exports grew much faster over the 2000-2005 period, which could in principal explain the entire increase in employment. However, the growth in domestic demand led to three-times more employment gains than did exports over 2000-2005, while productivity growth subtracted the same amount again from employment. We conclude that exports have become increasingly important in stimulating employment in China, but that the same gains could be obtained from growth in domestic demand, especially for tradable goods, which has been stagnant until at least 2002.

Abstract:
No abstract is available for this paper.

Abstract:
In this paper we develop and test two hypotheses about purchasing power parity (PPP) derived from the pricing behavior of profit- maximizing, exporting firms. The first is that changes in the price of traded goods relative to domestic substitutes, due to partial pass- through of exchange rates, will affect the PPP relation. The second is that PPP should hold on forward rather than spot exchange rates, due to hedging by firms. Using quarterly data for the United States, Canada, France, Germany, Japan and the United Kingdom, we find considerable support for the first but not the second hypothesis.

Abstract:
The recent literature on quid pro quo foreign direct investment (FDI) suggests that FDI may be induced by the threat of protection, and further, that FDI may be used as an instrument to defuse a protectionist threat. This paper uses a panel data set of 4-digit SIC level observations of Japanese manufacturing FDI into the United States in the 1980s to explore these hypotheses empirically. We find strong statistical support for the hypothesis that higher threats of protection lead to greater FDI flows, and post-regression simulations find that a rise in the expected probability of protection from five to ten percent means over a 30 percent rise in next-period FDI flows for an average industry. In addition, there is evidence that non- acquisition FDI by the Japanese had success in defusing the threat of an escape clause investigation in future periods.

Abstract:
In this paper we develop a monopolistic competition model where firms exercise their market power across multiple products. Even with CES preferences, markups are endogenous. Firms choose their optimal product scope by balancing the net profits from a new variety against the costs of cannibalizing their own sales. With identical costs across firms, opening trade leads to fewer firms surviving in each country but more varieties produced by each of those firms. With heterogeneous costs, the number of firms surviving in equilibrium is quite insensitive to the market size. When trade is opened, more firms initially enter, but the larger market size reduces the cannibalization effect and expands the optimal scope of products. As a result, the less efficient firms exit, and the larger market is accommodated by more efficient firms that produce more varieties per firm on average.

Abstract:
No abstract is available for this paper.

Abstract:
In the second-half of the 1990s, the positive impact of information technology on productivity growth for the United States became apparent. The measurement of this productivity improvement depends on hedonic procedures adopted by the Bureau of Labor Statistics (BLS) and Bureau of Economic Analysis (BEA). In this paper we suggest a new reason why conventional hedonic methods may overstate the price decline of personal computers. We model computers as a durable good and suppose that software changes over time, which influences the efficiency of a computer. Anticipating future increases in software, purchasers may "overbuy" characteristics, in the sense that the purchased bundle of characteristics is not fully utilized in the first months or year that a computer is owned. In this case, we argue that hedonic procedures do not provide valid bounds on the true price of computer services at the time the machine is purchased with the concurrent level of software. To assess these theoretical results we estimate the model and find that before 2000 the hedonic price index constructed with BLS methods overstates the fall in computer prices. After 2000, however, the BLS hedonic index falls more slowly, reflecting the reduced marginal cost of acquiring (and therefore marginal benefit to users) of characteristics such as RAM, hard disk space or speed.

Abstract:
This paper describes data on U.S. exports from 1972-1994, classified according to the Schedule B' system, Harmonized System (HS), Standard International Trade Classification (SITC, Revisions 2 and 3), and Standard Industrial Classification (SIC, 1972 basis), along with various concordances. All of these data sets are disaggregated by the destination country for exports. U.S. Exports, 1972-1994,' which can be ordered for $50 from the Publications Department, NBER, 1050 Massachusetts Avenue, Cambridge, MA 02138. A summary of the SIC data, which does not contain the source country detail and incorporates earlier years, is available via anonymous FTP from nber.org /pub/feenstra, or via the Web from www.nber.org. Disk 1 of the NBER Trade Database contained complete data on U.S. imports, and included on this CD-ROM is a revision to the SIC imports for the years 1989-1994. In" addition, the CD-ROM includes state-level exports and a number of other U.S. datasets contributed by various researchers, such as tariff reductions under NAFTA, antidumping cases, domestic and imported automobile data, materials consumption by industry, foreign trade zones, foreign investment, and programs used to construct and update the data.

Abstract:
This paper offers an explanation for the persistence observed in real exchange rate movements. The model combines pricing to market behavior with sticky prices generated by staggered contracts. A translog preference structure is sued to enhance both features. The paper finds that openness limits the degree of endogenous persistence. Nevertheless, the model under reasonable parameter values can replicate the serial correlation of real exchange rate data. Further, significant exchange rate data. Further, significant exchange rate volatility can be generated, and this is amplified by the presence of endogenous persistence

Abstract:
This paper offers an explanation for the persistence observed in real exchange rate movements. The model combines pricing to market behavior with sticky prices generated by staggered contracts. A translog preference structure is used to enhance both features. The paper finds that openness limits the degree of endogenous persistence. Nevertheless, the model under reasonable parameter values can replicate the serial correlation of real exchange rate data. Further, significant exchange rate volatility can be generated, and this is amplified by the presence of endogenous persistence.

Abstract:
No abstract is available for this paper.

Abstract:
This paper investigates the use of high-frequency scanner data to construct price indexes. In the presence of inventory behavior, purchases and consumption by individuals differ over time. Cost-of-living indexes can still be constructed using data on purchases. For weekly data on canned tuna, the paper contrast two different types of price indexes: fixed-base and chained indexes. Only the former are theoretically correct, and in fact, the chained indexes have a pronounced upward bias for most regions of the U.S. This upward bias can be caused by consumers purchasing goods for inventory. The paper presents some direct statistical support for inventory behavior being the cause of the upward bias, though advertising and special displays also have a very significant impact on shopping patterns.

Abstract:
We analyze the impact of market structure on the trade performance of South Korea, Taiwan and Japan. Korea has many large, vertically-integrated business groups known as chaebol, whereas business groups in Taiwan are smaller and more specialized in the production of intermediate inputs. We test the hypothesis that the greater vertical integration in Korea results in less product variety than for Taiwan, by constructing indexes of product variety and `product mix' in their exports to the United States. It is found that Taiwan tends to export a greater variety of products to the U.S. than Korea, and this holds across all industries. In addition, Taiwan exports relatively more high-priced intermediate inputs, whereas Korea exports relatively more high-priced final goods. A comparison with Japan is also presented, and we find that Japan has greater product variety in its sales to the U.S. than either Taiwan or Korea.

Abstract:
We analyze the impact of market structure on the trade performance of South Korea, Taiwan and Japan. Korea has many large, vertically-integrated business groups known as chaebol, whereas business groups in Taiwan are smaller and more specialized in the production of intermediate inputs. We test the hypothesis that the greater vertical integration in Korea results in less product variety than for Taiwan, by constructing indexes product variety and "product mix" in their exports to the United States. It is found that Taiwan tends to export a greater variety of products to the U.S. than Korea, and this holds across all industries. In addition, Taiwan exports relatively more high-priced intermediate inputs, whereas Korea exports relatively more high-priced final goods. A comparison with Japan is also presented, and we find that Japan has greater product variety in its sales to the U.S. than either Taiwan or Korea.

Abstract:
No abstract is available for this paper.

Abstract:
In this paper we derive the standard error of a price index when both prices and tastes or technology are treated as stochastic. Changing tastes or technology are a reason for the weights in the price index to be treated as stochastic, which can interact with the stochastic prices themselves. We derive results for the constant elasticity of substitution expenditure function (with Sato-Vartia price index), and also the translog function (with Toernqvist price index), which proves to be more general and easier to implement. In our application to Asian growth, we construct standard errors on the total factor productivity (TFP) estimates of Hsieh (2002) for Singapore. We find that TFP growth is insignificantly different from zero in any year, but cumulative TFP over fifteen years is indeed positive.

Abstract:
We argue that the incomplete information which the government has about domestic agents means that tariffs become an optimal instrument to protect them from import competition. We solve for the optimal government policies, subject to the political constraint of ensuring Pareto gains from trade, the incentive compatibility constraint, and the government's budget constraint. We find that the optimal policies take the form of nonlinear tariffs, so that both buyers and sellers of the import face and effective price which exceeds its world level. We find that the tariffs are never complete, in the sense of bringing prices for all individuals back to their initial level. Rather, it will always be possible to make some individuals strictly better off than at the initial prices, while ensuring that no persons are worse off.

Abstract:
This paper studies how industry export variety can be constructed and empirically relates trade liberalisation to the expansion of export variety. We document the expansion in export varieties from Mexico due to NAFTA. We also investigate the growth in export variety from China over 1990-2001, and compare those findings to Mexico. Among other findings, we show that the expansion of China's export variety due to the fall of US tariffs has caused an adverse market competition effect on the export variety from Mexico.

Abstract:
We explore the relationship between proximity of buyers and sellers and the organizational form of outsourcing. Outsourcing can be contractual in which suppliers undertake specific investments or involve generic market transactions. Proximity expands the variety of products sourced through contracts abroad rather than at home, but the range of generic imports is unchanged. A higher-quality foreign workforce raises the variety of contractual trade, but at the expense of generics. We confirm these predictions using data for ordinary versus processing exports from Chinese provinces to destination markets and also the predictions of an extended model that allows for multinational production.

Abstract:
The purpose of the paper is to measure the potential bias in the U.S. import price index due to the appearance of new product varieties, or new foreign suppliers, and determine the effect of this bias on the estimated income elasticity of import demand. Existing import price indexes are based on a sample of products from importing firms. We argue that if the share of import expenditure on the sampled products is falling over time, this will lead to an upward bias in the measured index. Using a correction based on the falling expenditure share on sampled countries, we find that the income elasticity of aggregate U.S. import demand is reduced from 2.5 to 1.7, or about halfway to unity. Our estimates suggest that the aggregate import price index is upward biased by about one and one-half percentage points annually.

Abstract:
In this paper we consider recent proposals to auction U.S. import quotas. using the funds so obtained to encourage relocation out of the protected industries. We argue that the information available to the government, or lack thereof, is a critical factor in understanding these policies. In a world or full information, it makes little sense to use auction quotas rather than tariffs. Similarly, it is unclear why an elaborate program of temporary protection is needed, rather than immediately opening trade and compensating people with an income transfer. When the government has Limited information, however, these policies become quite sensible and may even be optimal.

Abstract:
This paper describes data on U.S. imports from 1972-1994, classified according to the Tariff Schedule of the U.S. Annotated (TSUSA), Harmonized System (HS), Standard International Trade Classification (SITC, Revisions 2 and 3), and Standard Industrial Classification (SIC, 1972 basis), along with various concordances. All of these data sets are disaggregated by the source country for imports. These data are available on the CD-ROM: `NBER Trade Database, Disk 1: U.S. Imports, 1972-1994,' which can be ordered for $50 from the Publications Department, NBER, 1050 Massachusetts Avenue, Cambridge, MA 02138. The TSUSA and HS import data are at the most disaggregate level collected by the U.S. Census, and will be particularly useful for research on antidumping cases. The SITC import data will be valuable for those wanting to compare U.S. trade flows at a more aggregate level with comparable data for other countries. The SIC import data will be particularly useful for those wanting to study the effects of import competition on U.S. industries. A summary of the SIC data, which does not contain the source country detail and incorporates earlier years, is available via anonymous FTP from: nber.harvard.edu/pub/feenstra. A second CD-ROM, containing U.S. export data, will be released later in 1996.

Abstract:
No abstract is available for this paper.

Abstract:
No abstract is available for this paper.

Abstract:
We develop a procedure to rank-order countries and commodities using dis-aggregated American imports data. We find strong evidence that both countries and commodities can be ranked, consistent with the product cycle' hypothesis. Countries habitually begin to export goods to the United States according to an ordering; goods are also exported in order. We estimate these orderings using a semi-parametric methodology which takes account of the fact that most goods are not exported by most countries in our sample. Our orderings seem sensible, robust and intuitive. For instance, our country rankings derived from dis-aggregated trade data turn out to be highly correlated with macroeconomic phenomena such as national productivity levels and growth rates.

Abstract:
No abstract is available for this paper.

Abstract:
This paper studies how a rise in China's share of U.S. imports could lower pass-through of exchange rates to U.S. import prices. We develop a theoretical model with variable markups showing that the presence of exports from a country with a fixed exchange rate could alter the competitive environment in the U.S. market. In particular, this encourages exporters from other countries to lower markups in response to a U.S. depreciation, thereby moderating the pass-through to import prices. Free entry is found to further moderate the pass-through, in that a U.S. depreciation encourages entry of exporters whose costs are shielded by the fixed exchange rate, which further intensifies the competitive pressure on other exporters. The model predicts that certain conditions are necessary to facilitate this 'China explanation' for falling pass-through, including a 'North America bias' in U.S. preferences. The model also produces a log-linear structural equation for pass-through regressions indicating how to include the China share. Panel regressions over 19931999 support the prediction that a high China share in imports lowers pass-through to U.S. import prices.

Abstract:
This paper studies a simple model of buyer investment and its effect on the variety and vertical structure of international trade. A distinction is made between two types of buyer investment: "flexible" and "specific." Their interactions with the entry and pricing incentives of suppliers are analyzed. It is shown that (i) there can be multiple equilibria in the variety of products traded, and (ii) less product variety is associated with more intrafirm trade. The possibility of multiple equilibria is consistent with the observation that some similar economies, such as Taiwan and South Korea, differ substantially in their export varieties to the U.S. A formal empirical analysis confirms the negative correlation between product variety and intrafirm trade.

Abstract:
No abstract is available for this paper.

Abstract:
We evaluate the endogenous growth hypothesis using sectoral data for South Korea and Taiwan. Our empirical work relies on a direct measure of the variety of products from each sector which can serve as intermediate inputs or as final goods. We test whether changes in the variety of these inputs, for Taiwan relative to Korea, are correlated with the growth in total factor productivity (TFP) in each sector, again measured in Taiwan relative to Korea. We find that changes in relative product variety (entered as either a lag or a lead) have a positive and significant effect on TFP in eight of the sixteen sectors. Seven out of these eight sectors are what we classify as secondary industries, in that they rely on differentiated manufactured inputs, and therefore seem to fit the idea of endogenous growth. Among the primary industries that rely more heavily on natural resources, we find more mixed evidence.

Abstract:
We evaluate the endogenous growth hypothesis using sectoral data for South Korea and Taiwan. Our empirical work relies on a direct measure of the variety of products from each sector, which can serve as intermediate inputs or as final goods. We test whether changes in the variety of these inputs, for Taiwan relative to Korea, are correlated with the growth in total factor productivity (TFP) in each sector, again measured in Taiwan relative to Korea. We find that changes in relative product variety (entered as either a lag or a lead) have a positive and significant effect on TFP in eight of the sixteen sectors. Seven out of these eight sectors are what we classify as secondary industries, in that they rely on differentiated manufactured inputs, and therefore seem to fit the idea of endogenous growth. Among the primary industries, that rely more heavily on natural resources, we find more mixed evidence.

Abstract:
This paper generates persistent real effects of a monetary disturbance in the context of staggered price setters. The model combines two related and reinforcing features: a translog demand structure and a particular input--output production structure. These features offer a rationale why a firm, when computing its own optimal contract price, is influenced by the prices set in other overlapping contracts. Practically, the two features interact in a positive manner and provide a way to generate significant endogenous persistence.

Keyword(s): Endogenous persistence; Staggered contracts; Translog preferences

Abstract:
This paper begins with a summary of the major trends in foreign direct investment over the 1980-1995 period. Following that we present five fallacies, dealing with: the magnitude of foreign investment in Japan; the impact of FDI on the U.S. and Japanese trade balance; the extent to which multinational corporations control U.S. trade; the impact of exchange rate movements on foreign investment flows; and finally, the impact of FDI on welfare of the host country. The paper concludes with a further analysis of the recent trends in foreign investment and their implications for the competition faced by U.S. firms on international markets.

Abstract:
This paper aims to reduce the range within which the true U.S.-China bilateral trade deficit lies, and identify the determinants of the bilateral trade deficit. We take advantage of detailed Chinese Customs data at the commodity level. Our calculated U.S.-China bilateral trade deficit is $15 billion to $20 billion in 1994, and $16 billion to $22 billion in 1995, compared to the official range of $8 billion to $30 billion, and $9 billion to $34 billion, respectively. The widening of the U.S.-China bilateral trade deficit in recent years reflected various factors, including: (i) macroeconomic forces in the U.S. and China moving in opposite directions, causing their respective overall trade balance to move in opposite directions; and (ii) the accelerated relocation of production of U.S. imports from East Asia to China.

Abstract:
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.

Abstract:
The last few decades have seen a spectacular integration of the global economy through trade. The rising integration of world markets has brought with it a disintegration of the production process, however, as manufacturing or services activities done abroad are combined with those performed at home. I compare several different measures of foreign outsourcing, and argue that they have all increased since the 1970s. I also consider the implications of globalization for employment and wages of low-skilled workers, and for trade and regulatory policy, such as labor standards.

Abstract:
We develop an empirical framework to assess the importance of trade and technical change on the wages of production and non-production 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 of high-technology equipment can explain a substantial amount of the increase in the wages of non-production (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 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 has a 50% greater impact than does foreign outsourcing.

Abstract:
We develop a procedure to rank-order countries and commodities using dis-aggregated American imports data. We find strong evidence that both countries and commodities can be ranked, consistent with the "product cycle" hypothesis. Countries habitually begin to export goods to the United States according to an ordering; goods are also exported in order. We estimate these orderings using a semi-parametric methodology which takes account of the fact that most goods are not exported by most countries in our sample. Our orderings seem sensible, robust and intuitive. For instance, our country rankings derived from dis-aggregated trade data, turn out to be highly correlated with macroeconomic phenomena such as national productivity levels and growth rates.