*Offshoring in the Global Economy*

That's the title of the new Rob Feenstra book.  In the first section, he, like Paul Krugman, tries to resurrect the view that trade patterns explain recent wage movements.  For a published book, however, I'm not sure how much he has come up with:

As I have just shown, a factor content calculation can potentially give us a large impact of trade on factor prices, once we imput the factor intensities corresponding to disaggregate trade flows.  Additional work is needed to confirm this result for the United States, since I have made simplifying assumptions in the calculations; the estimates in table 1.5 use an input-output matrix from 1982, and the final years all use domestic shipments data from 1994.  In addition I have not experimented with constraining the Baldwin-style regressions to be stable across years, which might explain why the 10-digit results for 1997 give only a small impact of factor contents on the implied effective factor ratio, unlike what was found for 1994 and 2000.  And of course, it is most important to check my assumption that the coefficients of the Baldwin-style regression run at the 4-digit SIC level can actually be applied at more disaggregate[d] levels.  But even with all these considerations, the preliminary results are promising enough to convince us that headway can be made on the aggregation problem in factor content calculations.  In future work we can expect to find more profound impacts of offshoring as measured by the factor content of trade.

File under "If it were true, I'd expect it to be more obvious than that."  Still, I commend Feenstra for his thoroughness and straightforwardness.  It is in any case a stimulating book for the economist reader.

Here is Feenstra's home page.


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