The seminar will be held in the Visitor Centre at 3 pm.
Abstract
When labor abundant nations grow, their exports increase more in labor intensive than in capital intensive sectors. We utilize this difference in how exports are affected by growth to identify the causal effect of trade with low income countries (LICs) on U.S. inflation and productivity. In our panel covering 325 6-Digit NAICS industries from 1997 to 2006, OLS estimations suggest that increases in U.S. imports from nine LICs are associated with increasing producer prices and a mild productivity gain. In stark contrast, our two-stage least square specifications predict that LIC exports are associated with strong downward pressure on prices and a large effect on productivity. When LIC exporters capture 1% of U.S. market share, producer prices decrease by more than 5%, with about half of this change due to productivity
growth and half due to reduction of markups. Keywords: Low-Wage Country Import Competition, Comparative Advantage, Globalization
(JEL F1)