Imports, Exports, and the American Worker

By Susan M. Collins | Go to book overview

Summary

I have argued for using both quantity and price data to assess the effects of globalization on the labor market. I am leery of analyses or models that throw away seemingly relevant evidence (be it the volume of trade or prices). Those data do not fit some theoretical structure, particularly given the impressive skills of trade theorists in building models that can accomodate various patterns, evidence, and assumptions (albeit with some problems beyond the two-country, two-goods case). In particular, I defend the factor content calculations and cite Deardorff and Staiger as well as Krugman for providing theoretical structures that show that this tool does, more or less, what labor economists and others who have used it have intended it to do.74

With respect to the substance of the trade-labor debate, I contrasted two polar opposite views of the globalization--labor market relation: the "globalization explains everything" view--which attributes the immiserization of low-wage workers in advanced countries to globalization and more specifically to trade with LDCS; and the "globalization explains nothing" view--which claims that globalization, and trade in particular, has had no effect on the wages or employ of low-skill workers in advanced countries. I reject the "nothing" view but believe that the current state of evidence falls short of the "everything" view. Factor content studies suggest only a modest trade effect, unless one follows Wood in augmenting the standard model.75 Several studies of the relation between changes in relative prices and the skill content of employment are consistent with a trade effect. But they are also consistent with changes in the wages of unskilled workers falling for other reasons and being passed on in lower relative prices. That workers who face the most severe LDC competition--less-skilled women (in apparel manufacturing and related sectors)--have increased their pay relative to less-skilled men makes it difficult to believe the "everything" view.

I also highlight the importance of immigration of less-skilled workers on the job market as a major part of any analysis of globalization. Even with the addition of immigration, however, my assessment is a moderate one. To paraphrase a famous economist criticizing the views of another eminent colleague, trade matters, but it is not all that matters. In taking this moderate view of how globalization has affected low-skill workers, I could, of

____________________
74
. Deardorff and Staiger ( 1988); Krugman ( 1995).
75
. Wood ( 1994).

-130-

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