U.S. Multinationals and Competition from Low Wage Countries

33 Pages Posted: 11 Jun 2000 Last revised: 23 Apr 2003

See all articles by David A. Riker

David A. Riker

University of California at San Diego

S. Lael Brainard

Deputy National Economic Advisor, The White House; National Bureau of Economic Research (NBER)

Date Written: March 1997

Abstract

It is often argued that the globalization of production places workers in industrialized countries in competition with their counterparts in low wage countries. We examine a firm-level panel of foreign manufacturing affiliates owned by U.S. multinationals between 1983 and 1992 and find evidence to the contrary. Affiliate activities in developing countries appear to be complementary to rather than substituting for affiliate activities in industrialized countries. Workers do compete across affiliates, but the competition is between affiliates in countries with similar workforce skill levels. The results suggest that multinationals with affiliates in countries at different stages of development decompose production across borders into complementary stages that differ by skill intensity. The implied complementarity of traded intermediate inputs has important implications for the empirical debate over trade, employment, and wages.

Suggested Citation

Riker, David A. and Brainard, S. Lael, U.S. Multinationals and Competition from Low Wage Countries (March 1997). NBER Working Paper No. w5959. Available at SSRN: https://ssrn.com/abstract=225739

David A. Riker (Contact Author)

University of California at San Diego ( email )

9500 Gilman Drive
La Jolla, CA 92093-0508
United States

S. Lael Brainard

Deputy National Economic Advisor, The White House ( email )

Old Executive Office Building
725 17th Street, NW
Washington, DC 20502
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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