Abstract
This study examines various claims that in the U.S., international trade has contributed to a loss of manufacturing base, an increased gap between unskilled and skilled wages, lower employment, and a loss of productivity. Cointegration tests indicate that in the long run and at the macro level, the ratio of trade to output and FDI to output are correlated with the manufacturing share of output, the ratio of unskilled to skilled wages, labor productivity, and the employment rate. However, Granger causality tests reveal that, with one exception, causation does not run from trade to the domestic variables, the only exception being that FDI Granger causes productivity. When the focus is shifted to the manufacturing sector, the results support the proposition that openness to trade has had adverse effects on this sector.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Alston, Richard; Kearl, James; Vaughan, Michael. “Is There a Consensus Among Economists in the 1990’s?” American Economic Review, 82, 2, May 1992, pp. 203–09.
Bella, Mariano; Quintieri, Beniamino. “The Effect of Trade on Employment and Wages in Italian Industry,” Labour: Review of Labour Economics and Industrial Relations, 14, 2, June 2000, pp. 291–309.
Borjas, George; Freeman, Richard; Katz, Lawrence. “On the Labor Market Effects of Immigration and Trade,” in George Borjas and Richard Freeman (eds.), Immigration and the Workforce: Economic Consequences for the United States and Source Areas, Chicago and London: University of Chicago Press, 1992, p. 213–44.
Cooper, Richard. “Growing World Trade: Causes and Consequences. Comments and Discussion,” Brookings Papers on Economic Activity, 25, 1, April 1995, pp. 363–68.
Davis, John. “Is Trade Liberalization an Important Cause of Increasing U.S. Wage Inequality? The Interaction of Theory and Policy,” Review of Social Economy, 57, 4, December 1999, pp. 488–506.
Dollar, David. “Outward-Oriented Developing Economies Really Do Grow More Rapidly: Evidence from 95 LDCs, 1976–1985,” Economic Development and Cultural Change, 40, 3, April 1992, pp. 523–44.
Greenaway, David; Hine, Robert; Wright, Peter. “An Empirical Assessment of the Impact of Trade on Employment in the United Kingdom,” European Journal of Political Economy, 15, 3, September 1999, pp. 485–500.
Gregory, Mary; Greenhalgh, Christine. “International Trade, De-Industrialisation, and Labour Demand—An Input–Output Study for the U.K. 1979–1990,” in Jitendralal Borkakoti and Chris Milner (eds.), International Trade and Labor Markets, London: St. Martin’s Press, 1997, Chapter 4.
Krugman, Paul. “Growing World Trade: Causes and Consequences,” Brookings Papers on Economic Activity, 25, 1, April 1995, pp. 327–62.
Krugman, Paul; Lawrence, Robert. “Trade, Jobs, and Wages,” National Bureau of Economic Research Working Paper no. 4478, 1993.
Messerlin, Patrick. “The Impact of Trade and Capital Movements on Labour: Evidence of the French Case,” OECD Economic Studies, 24, 1995, pp. 89–124.
Miller, Tracy. “Impact of Globalization on U.S. Wage Inequality: Implications for Policy,” North American Journal of Economics and Finance, 12, 3, November 2001, pp. 219–42.
OECD. “Structural Change and Industrial Performance: A Seven Country Growth Decomposition Study,” Paris, 1992.
Romer, David. “Openness and Inflation: Theory and Evidence,” The Quarterly Journal of Economics, 108, 4, November 1993, pp. 869–903.
Sapir, Andre; Schumacher, Dieter. “The Employment Impact of Shifts in the Composition of Commodity and Services Trade,” in Employment Growth and Structural Change, Paris: OCED, 1985, pp. 115–27.
Author information
Authors and Affiliations
Additional information
A slightly different version of this paper was presented at the Fifty-sixth International Atlantic Economic Conference, October 16–19, 2003 in Quebec City, Canada. The research reported in this paper is partially funded by a grant from the Institute for Global Economic Affairs at Marquette University.