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下载：8积分Super-Specialization and the Gains from Trade
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AbstractAn important facet of “globalization” is the spread of cross-border production, which is variously known as intro product specialization, super-specialization, or production fragmentation. This advanced stage in the international division of labor works particularly well between high-wage developed and low-wage emerging economies. But it is precisely this context in which the practice has been criticized for destroying jobs and undermining wages.
This paper examines the welfare implications of this type of specialization on the part of labor-intensive, import-competing industries in advanced countries. The results will surprise the skeptics, for when import-competing industries abandon production of labor-intensive components, wages rise and industry employment and output expand. National welfare increases. For a large country, the terms of trade improve, raising national welfare still further.Do you want to read the rest of this article?Request full-text
CitationsCitations65ReferencesReferences5ArticleJun 2017ArticleFull-text availableMay 2015ArticleJul 2010ArticleFull-text availableJun 2010Compet ChangeArticleFull-text availableJan 2010ArticleFull-text availableFeb 2009Show more Full-text · Article · Oct 2015 +1 more author...Chapter · Jan 1989 · SSRN Electronic Journal Article · Jan 2014 Data provided are for informational purposes only. Although carefully collected, accuracy cannot be guaranteed. Publisher conditions are provided by RoMEO. Differing provisions from the publisher's actual policy or licence agreement may be applicable.This publication is from a journal that may support self archiving.Last Updated: 28 Aug 17当前位置： >>
全球化与开放经济globalization and open economy
Globalization and the Open EconomySVEN W. ARNDTABSTRACTDoes offshore sourcing by domestic producers destroy jobs? Does it lower wages? To a growing number of observers the answer to both questions appears to be affirmative. This paper examines the issue in the context of a conventional trade framework that has been amended to allow production to be disaggregated into its constituent activities. Offshore sourcing generally increases employment in an industry by creating more jobs in the remaining activities than are lost to sub-contracting. Offshore sourcing by labor-intensive importables industries raises both employment and wages. In general, offshore sourcing enables producers to strengthen their competitive positions against foreign rivals in the markets for end-products. When offshore sourcing involves simultaneous intra-product specialization in a labor-scarce importing country (like the United States) and a labor-abundant exporting country (like Mexico), employment and wages rise in both.1. INTRODUCTIONAmong the features attributed to the recent evolution of the world economy. its perceived &globalization& have been popular favorites with economists, politicians and the public at large. The term may, of course, mean different things to different people, but for many, a central idea seems to be the spread of global sourcing and sub-contracting. This paper explores the implications of offshore sourcing for employment. output, factor returns, and welfare. Politicians and journalists alike have expressed concerns that offshore sourcing by U.S. producers destroys jobs and depresses wages. Their view is shared by many in the labor movement and appears to have played a role in recent strike actions at large companies like Boeing and General Motors. Offshore sourcing occurs when some activities involved in the making of a product are performed abroad. The effects of offshore sourcing are examined below in the context of standard trade theory, amended to allow for the separation of production into its component stages and thereby for intra-product specialization across countries. It is shown that offshore sourcing need not cut jobs or reduce wages. Indeed, offshore sourcing on the part of labor-intensive importables industries in capital-abundant countries raises employment and wages. In such cases, offshore sourcing enhances producers’ ability to deal with foreign competition. The next section examines the implications of offshore sub-contracting for factor allocation and factor returns. The focus is on sub-contracting by labor-intensive importables industries in capital -abundant countries. Foreign sourcing by exportables industries is treated in a subsequent section.Sven W. Arndt - The Lowe institute of Political Economy, Claremont McKenna College, 850 Columbia Avenue. Claremont, CA . North American Journal of Economics & Finance 8(l): 71-79 ISSN
Copyright ? 1997 by JAI Press Inc. All rights of reproduction in any form reserved72ARNDTNext, the implications of offshore sourcing by both the importing and the exporting country are considered. The main finding is that intra-product specialization by both countries raises wages in both, suggesting that higher degrees of trade integration between, say, the United States and Mexico are capable of raising workers’ living standards in both countries. The paper ends with a section on the aggregate welfare effects of offshore sourcing, followed by some concluding observations.11. GLOBAL SOURCING AND FACTOR ALLOCATIONConsider the standard case of two products, X and Y, and two factors. capital (K) and labor (L). Figure I a compares input-output combinations for the two industries evaluated at the same cost. The factor-price ratio is given by the straight line w/r. while relative goods prices are implicit in the relationship between the quantities denoted by the two isoquants, X0 and Y0. Production of good Y is relatively capital-intensive. In the traditional representation of factor-intensities, we are not concerned with whether production is one seamless process described by the requisite factor intensity or is made up of a series of stages or component activities whose divergent factor-intensities average out to that indicated for the final product. When component stages differ in their factor intensities, the intensity indicated along a product’ expansion path is merely the weighted average of the factor s intensities of its various stages. This possibility is depicted for commodity X in Figure Ib, where production is assumed to be separable into two stages, whose respective factor intensities are given by expansion paths ox1, and ox2. Path ox, representing the &overall& factor intensity of X-production, gives the weighted average (by vector addition) of the factor intensities of the component stages.1 Quantities X10 and X20 represent activity or output levels, respectively, for the two stages corresponding with output level X0 of the final product. Decisions to sub-contract should clearly be dictated by considerations of comparative advantage. Sub-contracted activities or components can be products or services. Y1, for example, may represent a component part of product Y or its design or final assembly. A company like Boeing, for instance. may import relatively labor-intensive components to beFigure 1. Factor Intensities of Product SegmentsGlobalization and the Open Economy73combined with more capital-intensive parts in a final assembly process that is also relatively capital-intensive. In other instances, U.S. companies may export capital-intensive components to Mexico for final assembly, if the latter is relatively labor-intensive. In the standard model, in which production is not taken as decomposable. Trade is assumed to consist of goods which have been produced in their entirety in the country of origin. What if production were decomposable and what if components possessed varying factor intensities? Would there be grounds for pushing specialization beyond the level of products to their constituent parts or activities? Would there be grounds for intra-product specialization? What if, furthermore, as depicted in Figure 1c, Y-production were also decomposable into two stages and what if one of those stages (say, stage two) were more labor-intensive (or less capital -intensive) than the first stage of X-production? Should the capital-abundant country then specialize in producing the first stages of both X and Y, while importing the second stages of both?A. Offshore Sourcing by the Import SectorForeign sub-contracting may be undertaken by importables as well as exportables producers. In this section, the focus is on offshore sourcing by the labor-intensive import-competing industry of an advanced, capital-abundant country. Offshore sub-contracting by the corresponding exportables industry in the developing country is examined in the next section.2 The two panels of Figure 2 summarize the essential features of offshore sourcing by the importables industry. The top panel (Fig. 2a) starts with the set-up of Figure Ia by initially ruling out offshore sourcing. The inability to engage in offshore sourcing may be due to technological barriers and prohibitive communications and coordination costs, or the result of legal prohibitions and standard trade restraints. Although the specifics defining the barriers to offshore sourcing are likely to be important in practice, they do not matter for present purposes. When those barriers are in place, any product made in our country is assumed to be produced in its entirety: there is no offshore sourcing. The country is assumed to be small and thus a price-taker in world markets. The initial factor-price ratio is w/r, and the relative commodity price is given by the respective quantities embodied in isoquants X0 and Y0. Suppose that the aforementioned barriers to offshore sourcing are eliminated by advances in technology and communications that reduce the cost of offshore sourcing. Suppose, in order to keep the analysis simple, that these cost savings make home production Of x2, the labor-intensive stage of commodity X economically unsustainable. All x2-production is assumed to be sub-contracted to foreign suppliers. Since the country is small, these adjustments have no effect on world prices.3 Domestic production of X now consists solely of stage x1, which is assumed to include final assembly of good X. The factor- intensity of the X-sector at the original wage-rental ratio thus shifts to expansion path ox1. While the relative price of commodity X has remained unchanged, its overall costs of production have been driven down by the shift to lower-cost foreign procurement. This cost-saving is represented by the inward shift of the X-isoquant to X’.4 The change in relative costs makes the original factor-price ratio inconsistent with the unchanged commodity price ratio. Since the relative price of X has remained unchanged, while its production costs have fallen, producers will want to increase output. In so doing,74ARNDT(b)Figure 2. Intra-Product SpecializationGlobalization and the Open Economy75they will raise the demand for labor relative to capital, given the relative labor-intensity of X1-production, and thus push up wages relative to capital rentals. Relative factor prices must change so that the new ratio, (w/r)’ is tangent to the Y-isoquant and , the new X-isoquant. As the factor-price ratio moves in favor of wages, it induces both industries to substitute capital for labor. This change is indicated by the counter-clockwise rotation of the industry expansion paths to ox1’ and oy1’ respectively. , Offshore sub-contracting by the import-competing industry has the effect of raising wages throughout the economy relative to capital. Note that this wage increase is both nominal and real. The cost, in terms of labor, of each of the two goods may be inferred from the intercept of the factor-price ratio with the horizontal axis. Clearly, the real cost in terms of labor effort of both goods has fallen. The fears of critics that globalization, manifested in offshore procurement, reduces wages in labor-scarce countries are clearly not justified in this instance. But what about the effect on jobs? To answer that question, we turn to the bottom half of Figure 2, which reproduces the original expansion paths, ox1’ and oy1’, as well as the final expansion paths, ox’ and oy’. With factor endowments given by point E. the original output mix is given bN levels X0 and Yo, respectively. The output mix shifts to levels X0 and Y1, respectively, when the labor-intensive component of commodity X is procured from abroad. It is clear that more of x, and hence of X is now produced and larger amounts of both labor and capital are now employed in the globalized import-competing industry than before the change in sourcing. The additional resources needed in the X-industry are drawn away from the exportables sector, Y, whose output necessarily shrinks. Thus, not only the fear of lower wages, but the fear that globalization reduces employment, is not justified in this instance. This is an important result, for it suggests that offshore sourcing enables industries producing labor-intensive commodities under conditions of foreign competition to not only protect jobs, but to increase the number of jobs while boosting wages.5III. OFFSHORE SOURCING BY BOTH COUNTRIESSuppose that the advanced country is the United States and that the act of offshore sourcing of component x2 takes place in relation to Mexico. Suppose further that, while U.S. producers sub-contract the labor-intensive component, x2, to Mexico, Mexican producers subcontract production of the capital-intensive stage, x1, to the United States. Suppose also that final assembly of product X can be attached to either component stage. Thus, instead of the original situation in which both countries produce commodity X, there has been intra-product specialization with each country producing the component which is relatively intensive in its abundant factor. Specialization has moved from final products to component stages. Figure 3 illustrates the consequences of offshore sourcing by Mexico. Before outsourcing, the expansion path is ox, which is the weighted average of ox1 (not drawn) and ox2. In the presence of outsourcing of stage one, factor intensities in the X-sector are given by expansion path ox2 and the relevant isoquant shifts towards the origin, say, to xM’. With relative commodity prices set in the world market, relative factor prices must change in Mexico, just as they needed to change in the United States. The new factor-price ratio, which must be tangent to the original Y-isoquant and the new X-isoquant, is given by (w/r)M’. Intra-product specialization in Mexico's X-industry has an76ARNDTFigure 3. Offshore Sourcing by Mexicoeffect analogous to that of intra-product specialization in that industry in the United States: it raises wages. Thus, when producers in the X-industry, which is Mexico’ export industry and America’ import s s industry, engage in intra-product specialization by farming out parts of production which use their respective scarce factors intensively, wages rise in both countries. Note that when Mexico engages in off-shore sourcing, the expansion path rotates in a clockwise direction from ox to ox2. But when the steeper wage-rental ratio induces substitution away from labor, the expansion path moves in a counter-clockwise direction. If the factor-price effect is dominated by the outsourcing effect, the new expansion path will be flatter than the old. In the reverse case, depicted in Figure 3, the new expansion path will be steeper. In that instance, X-output rises with offshore sourcing, while Y-output falls. Employment of both labor and capital rises in X production and falls in Y-production.6IV. GENERAL WELFARE EFFECTSThe preceding has focused on the effects of off-shore sourcing on production and factor returns. What remains to be determined is its effect on national welfare. This is done for the capital-abundant country in Figure 4, in which the two axes measure outputs of the two final goods, respectively. Curve TT is the initial production possibility curve when both components of good X are produced at home. Under conditions of free trade, with world prices given by Pw, the small country will produce at Q and consume at C. The country exports Y in exchange for X.Globalization and the Open Economy77Figure 4. Offshore Sourcing and WelfareWhen component x2 is obtained through offshore sourcing, the production possibility curve shifts out. The outward shift increases as the cost of procuring x2 abroad declines relative to producing it at home. The magnitude of the shift is largest when the imported component is obtained &free,& that is, without expenditure of current resources. This might occur when imports of components are obtained on credit (via trade deficits).7 Curve TT in Figure 3 is drawn on the assumption that trade is balanced, so that current imports of x are paid for with exports of x1 or Y. In the presence of off-shore sourcing, production moves to Q’ and consumption to C Output of final product X rises while that of Y falls. This result is analogous to the Rybczynski effect of technological change or factor accumulation. National welfare clearly risesV. CONCLUDING REMARKSConcerns about the welfare-reducing implications of offshore sourcing appear to be greatly exaggerated. By allowing producers to shed their less competitive operations, offshore sourcing makes them more effective competitors in world markets for end products. Th intra-product concentration fostered by offshore sourcing pushes specialization into higher dimensions and thereby captures hitherto unattainable gains from trade. Rather than threaten employment, offshore sourcing enhances it in industries which make use of it. The effect of offshore sourcing on wages depends on the nature of the industry. Offshore sourcing on the part of a labor-intensive industry in a capital-abundant country, raises wages in nominal as well as real terms. Offshore sourcing by the capital intensive sector, that is, the exportables sector, reduces wages.78ARNDTCooperative offshore sourcing by labor-intensive industries in both exporting and importing countries-along the lines of some U.S.-Mexico operations-is capable of increasing output and employment in that industry in both countries and raising wages in both. This outcome underscores the mutuality of benefits from cooperative intra-product specialization.Acknowledgments: The paper was presented as the Presidential Address at the meeting of the North American Economics and Finance Association in New Orleans on January 5. 1997.NOTES1. The output of a component stage can be a service, such as design, coordination, or assembly. or an intermediate product or input, such as an automobile engine or an aircraft wing. 2. For an examination of offshore sourcing by the capital-intensive industry of a capital-abundant country, see Arndt (1997). 3. See Krugman (1995) for an evaluation of the implications of this assumption, albeit in a different context. 4. Shifts of this type are familiar from the analysis of technical progress. For an example, see Johnson (1971). See also Jones and Kierzkowski (1990) for an analysis of separable production stages. It is important to note that although no domestic resources are used directly in the production of stage 2 of product X imports of that component will have to be paid for--either with exports of x1, or with exports of Y. Isoquant X’ may be defined so as to reflect those costs. If the country obtains imported inputs of x2 on credit so that no resources are used in the current period, then the resource cost of X0 units of X is given by point X10 in Figure lb. If currently produced quantities of x1 are used to pay for imports of x2, then isoquant X’ in Figure 2a may be seen as representing the amount of labor and capital used in the current period to produce an amount X0 of X, including enough “extra& x1 to pay for imports of x2 needed to complete domestic production of X0. Thus, for example, the excess of x1, output embodied in isoquant X’ relative to X10, (in Figure lb) represents the cost of X20 units of x2, in terms of x1. The implications of these payments are explored further in a later section. 5. Note that jobs will be lost in the production of stage 2, while additional jobs will be created in stage 1. Workers will thus have to shift between jobs and this may create adjustment problems. But inasmuch as adjustment is within an industry and perhaps even within a firm, the adjustment costs should be smaller than those involved in moving workers from industry X to industry Y. On the other hand, both workers and capital will be relocated from Y to X. 6. When the effect of intra-product specialization dominates the effect of factor substitution, the new X-industry expansion path is flatter than the old, so that labor utilization rises in that industry, while capital utilization falls. In the Y-industry, on the other hand, labor utilization falls while capital utilization rises. In the end, the X industry is more labor intensive than before, while the Y industry is more capital intensive than before. See Arndt (1997) for additional details. 7. See Arndt (1996) for further details and for an application to off-shore sourcing in the context of preference areas. See also Krueger (1974).REFERENCESArndt, S.W. 1996. &International Sourcing and Factor Allocation in Preference Areas.& Presented at the workshop on International Trade and Factor Movements between Distorted Economies. Konstanz, July 4-6, 1996.Globalization and the Open Economy79- 1997. &Globalization and the Gains from Trade.& In Trade, Growth, and Economic Policv in Open Economies, edited by K. Jaeger and K.-J. Koch. New York: Springer-Verlag. Johnson, Harry G. 197 1. Two-Sector Model of General Equilibrium. Chicago: Aldine.Atherton. Jones. Ronald W., and Henryk Kierzkowski. 1990. &The Role of Services in Production and International Trade: A Theoretical Framework.& Pp. 31-48 in The Political Economy of International Trade, edited by R.W. Jones and A.O. Krueger. Oxford: Blackwell. Krueger, Anne 0. 1974. &The Political Economy of the Rent-Seeking Society.& American Economic Review 64 (June): 291-303. Krugman, Paul. 1995, November. &Technology, Trade, and Factor Prices.& NBER Working Papers, No. 5355. Cambridge, MA: National Bureau of Economic Research.
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