Productivity Measurement and the Impact of Trade and Technology on Wages: Estimates for the U.S., 1972-1990

51 Pages Posted: 13 Jul 2000 Last revised: 5 Oct 2010

See all articles by Robert C. Feenstra

Robert C. Feenstra

University of California, Davis - Department of Economics; National Bureau of Economic Research (NBER)

Gordon H. Hanson

University of California, San Diego (UCSD) - Graduate School of International Relations and Pacific Studies (IRPS); National Bureau of Economic Research (NBER)

Date Written: June 1997

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.

Suggested Citation

Feenstra, Robert C. and Hanson, Gordon H., Productivity Measurement and the Impact of Trade and Technology on Wages: Estimates for the U.S., 1972-1990 (June 1997). NBER Working Paper No. w6052. Available at SSRN: https://ssrn.com/abstract=226462

Robert C. Feenstra (Contact Author)

University of California, Davis - Department of Economics ( email )

One Shields Drive
Davis, CA 95616-8578
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916-752-9240 (Phone)
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National Bureau of Economic Research (NBER)

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Gordon H. Hanson

University of California, San Diego (UCSD) - Graduate School of International Relations and Pacific Studies (IRPS) ( email )

9500 Gilman Drive
La Jolla, CA 92093-0519
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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