We employ data that match the population of Danish workers to the universe of private-sector Danish firms, with product-level trade flows by origin- and destination-countries. We document new stylized facts about offshoring and instrument for offshoring and exporting. Within job spells, offshoring increases (decreases) the high-skilled (low-skilled) wage; exporting increases the wages of all skill-types; the net wage-effect of trade varies substantially within the same skill-type; conditional on skill, the wage-effect of offshoring varies across task characteristics. We estimate the overall effects of offshor-ing on workers ’ present and future income streams by constructing pre- offshoring-shock worker-cohorts and tracking them over time. (JEL F14, F16, J24, J31, L24) A key feature of global trade in the new century is the rapid growth of offshoring (Feenstra and Hanson 2003) and trade in intermediate goods (Hummels, Ishii, and Yi 2001). How has offshoring affected workers ’ wages? The answer to this question is not theoretically obvious. At some level purchasing an input from a foreign source must replace a task previously done by a domestic worker, which would suggest dis-

Abstract: How does trade liberalization affect wages? This is the first paper to consider in theory and data how the impact of final and intermediate input tariff cuts on workers’ wages varies with the global engagement of their firm. Our model predicts that a fall in output tariffs lowers wages at import-competing firms, but boosts wages at exporting firms. Similarly, a fall in input tariffs raises wages at import-using firms relative to those at firms that only source locally. Using highly detailed Indonesian manufacturing census data for the period 1991 to 2000, we find considerable support for the model’s predictions.

How do trade liberalizations a¤ect relative factor prices and to what extent do they cause factors to reallocate across sectors? We …rst present a general accounting framework that nests a wide range of models that have been used to study the link between globalization and factor prices and from which we obtain two su ¢ cient statistics that determine factor prices. Under some restrictions, changes in the "factor content of trade " (FCT) fully determine the impact of trade on relative factor prices. We then study the determination of the FCT in a speci…c version of our general framework that uni…es traditional models of trade and factor prices featuring sectoral productivity and factor endowment di¤erences and new models featuring imperfect competition and heterogeneous producers. We show how heterogeneous …rms’decisions shape the FCT, and, therefore, the impact of trade liberalization on relative factor prices and between-sector factor allocation.

We construct a model of international trade and multinational production (MP) to examine the impact of globalization on the skill premium in skill-abundant and skill-scarce countries. The key mechanisms in our framework arise from the interaction between three elements: asymmetric countries, technological heterogeneity across producers within sectors, and skill-biased technology. Reductions in trade and/or MP costs induce a reallocation of resources towards a country’s comparative advantage sector (increasing the skill premium in skill-abundant countries and reducing it in skill-scarce countries) and within sectors towards more productive and skill-intensive producers (increasing the skill premium in all countries). We parameterize the model to match salient features of the extent and composition of trade and MP between the U.S. and skill-abundant and skill-scarce countries in 2006. We show that a reduction in trade and MP costs, moving from autarky to 2006 levels of trade and MP, increases the skill premium by 5 % in skill-abundant countries and 6 % in skill-scarce countries. Globalization accounts for between 1=9th and 1=6th of the 24 % rise in the U.S. skill premium between 1966 and 2006. MP is at least as important as international trade in generating this rise in the skill premium. We thank Francisco Alcalá, Chris Kurz, and especially Eric Verhoogen for help with their data. We are grateful to

While neoclassical theory emphasizes the impact of trade on wage inequality between occupations and sectors, more recent theories of firm heterogeneity point to the impact of trade on wage dispersion within occupations and sectors. Using linked employer-employee data for Brazil, we show that much of overall wage inequality arises within sector-occupations and for workers with similar observable characteristics; this within component is driven by wage dispersion between firms; and wage dispersion between firms is related to firm employment size and trade participation. We then extend the heterogenous-firm model of trade and inequality from Helpman, Itskhoki, and Redding (2010) and structurally estimate it with Brazilian data. We show that the estimated model fits the data well, both in terms of key moments as well as in terms of the overall distributions of wages and employment, and find that international trade is important for this fit. In the estimated model, reductions in trade

I study trade-induced transitional dynamics by estimating a structural dynamic equilibrium model of the Brazilian labor market. The model features a multi-sector economy with overlapping generations, heterogeneous workers, endogenous accumulation of sector-speci c experience and costly switching of sectors. The model's estimates yield median costs of mobility ranging from 1.4 to 2.7 times annual average wages, but a high dispersion across the population. In addition, sector-speci c experience is imperfectly transferable across sectors, leading to additional barriers to mobility. Using the estimated model for counter-factual trade liberalization experiments, the main ndings are: (1) there is a large labor market response following trade liberalization but the transition may take several years; (2) potential aggregate welfare gains are signi cantly mitigated due to the delayed adjustment; (3) trade-induced welfare e ects depend on initial sector of employment and on worker demographics. The experiments also highlight the sensitivity of the transitional dynamics with respect to assumptions regarding the mobility of capital.

Notes: Real exchange rate calculated as e×CPI(US)/CPI(Mexico), where e is peso/US $ nominal exchange rate.

This paper analyzes the impact of trade integration on wage inequality when there is heterogeneity across both workers and firms. By incorporating labor assignment into the heterogeneous firms literature I develop a model in which positive assortative matching between worker skill and firm technology explains the employer size-wage premium and the exporter wage premium. Under trade, fixed export costs cause the selection of high productivity, high skill firms into exporting and an upwards shift in the firm technology distribution. Consequently, the demand for skill and wage inequality increase in all countries, both on aggregate and within the export sector. This result holds both when firms’ technologies are determined by a random draw and when technology is endogenous to firm level R&D. With endogenous technology, the increased demand for skill caused by trade liberalization results from technology upgrading by new exporters.

We characterize how firms select between alternative ways of serving a market. “First-order ” selection effects, whether firms enter or not, are extremely robust. “Second-order ” ones, how firms serve a market conditional on entry, are less so: more efficient firms will select into the entry mode with lower market-access costs, if and only if firms ’ maximum profits are supermodular in production and marketaccess costs. Supermodularity holds in many cases but not in all. Exceptions include FDI (both horizontal and vertical) when demands are “sub-convex ” (i.e., less convex than CES), fixed costs that vary with access mode, and R&D with threshold effects.

International trade and collective bargaining outcomes Evidence from German employer-employee data