Recent empirical and case study evidence documents a strong association between the adoption of computers and increased use of college educated or non-production workers. With few exceptions, the conceptual link explaining how computer technology complements skilled labor or substitutes for unskilled labor is less well developed. This paper applies an understanding of what computers do – the execution of procedural or rules-based logic – to develop and test a simple model of how the widespread adoption of computers in the workplace might alter workplace skill demands. Two essential contentions of our framework are that computer capital (1) substitutes for a limited and well-defined set of human activities, those involving routine (repetitive) cognitive and manual tasks; and (2) complements a second set of activities, those involving non-routine problem solving and interactive tasks. Under the assumption that routine and non-routine tasks are imperfect substitutes, the task framework implies measurable changes in the task content of employment. We examine these changes using representative samples of workers from 1960 to 1998 where individual characteristics are augmented with Dictionary of Occupational Title variables describing their occupations ’ requirements for routine and non-routine cognitive and manual skills. We find that computerization is associated with declining relative industry

Abstract: Dramatic changes are occurring in the nature of international trade. Production processes increasingly involve a sequential, vertical trading chain stretching across many countries, with each country specializing in particular stages of a good’s production sequence. We document a key aspect of these vertical linkages – the use of imported inputs in producing goods that are exported – which we call vertical specialization. Using input-output tables from the OECD and emerging market countries we estimate that vertical specialization accounts for up to 30 % of world exports, and has grown as much as 40 % in the last twenty-five years. The key insight about why vertical specialization has grown so much lies with the fact that trade barriers (tariffs and transportation costs) are incurred repeatedly as goods-in-process cross multiple borders. Hence, even small reductions in tariffs and transport costs can lead to extensive vertical specialization, large trade growth, and large gains from trade. We formally illustrate these points by developing an extension of the Dornbusch-Fischer-Samuelson Ricardian trade model.

In this paper, we examine the increase in relative wages for skilled workers in Mexico during the 1980s. Rising wage inequality in Mexico is linked to foreign capital inflows. We study the impact of foreign direct investment (FDI) on the skilled labor share of wages in Mexico over 1975–1988. We measure FDI using regional data on foreign assembly plants. Growth in FDI is positively correlated with the relative demand for skilled labor. In regions where FDI has concentrated, growth in FDI can account for over 50 percent of the increase in the skilled labor wage share that occurred in the late 1980s. 1997 Elsevier Science B.V.

This essay discusses the effect of technical change on wage inequality. I argue that the behavior of wages and returns to schooling indicates that technical change has been skill-biased during the past sixty years. Furthermore, the recent increase in inequality is most likely due to an acceleration in skill bias. In contrast to twentiethcentury developments, much of thr technical change during the early nineteenth century appears to be skill-replacing. I suggest that this is because the increased supply of unskilled workers in the English cities made the introduction of these technologies profitable. On the other hand, the twentieth century has been characterized by skillbiased technical change because the rapid increase in the supply of skilled workers has induced the development of skill-complementary technologies. The recent acceleration in skill bias is in turn likely to have been a response to the acceleration in the supply of skills during the past several decades.

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To understand the economic value of computers, one must broaden the traditional definition of both the technology and its effects. Case studies and firm-level econometric evidence suggest that: 1) organizational “investments ” have a large influence on the value of IT investments; and 2) the benefits of IT investment are often intangible and disproportionately difficult to measure. Our analysis suggests that the link between IT and increased productivity emerged well before the recent surge in the aggregate productivity statistics and that the current macroeconomic productivity revival may in part reflect the contributions of intangible capital accumulated in the past.

This paper focuses on three unresolved issues with regard to the impact of trade reform. First, many studies linking trade reform to long run growth are surprisingly fragile. To illustrate the problems with this literature, we examine a popular measure of openness w recently introduced by Sachs and Warner Sachs, J., Warner, A., 1995. Economic reform and the process of global integration. Brookings Papers on Economics Activity 1, pp. x 1--117 . We show that their measure fails to establish a robust link between more open trade policies and long run growth. The second puzzle we identify is the small impact of trade reform on employment in developing countries. Finally, we analyze evidence on the relationship between trade reform and rising wage inequality, focusing on the 1985 Mexican trade reform. Wage inequality in Mexico rose after the reform, which is puzzling in a Heckscher--Ohlin context if Mexico has a comparative advantage in producing low skill-intensive goods. q 1999 Elsevier S...

This paper derives and empirically examines how factor proportions determine the structure of commodity trade. It integrates a many-country version of the Heckscher-Ohlin model with a continuum of goods developed by Dornbusch-Fischer-Samuelson (1980) with the Krugman (1980) model of monopolistic competition and transport costs. The commodity structure of production and bilateral trade is fully determined. Two main predictions emerge. There is a quasi-Heckscher-Ohlin prediction. Countries capture larger shares of world production and trade of commodities that more intensively use their abundant factors. There is a quasi-Rybczynski effect. Countries that rapidly accumulate a factor see their production and export structures systematically move towards industries that intensively use that factor. Both predictions receive support from the data. Factor proportions appear to be an important determinant of the structure of international trade.

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We consider trade between a flexible wage America and a rigid wage Europe. In a benchmark case, a move from autarky to free trade doubles European unemployment. American wages rise to the European level. Entry of the unskilled “South ” to world markets raises European unemployment. Europe’s commitment to the high wage wholly insulates America from the shock. Immigration to America raises American income, but lowers European income dollar-for-dollar, while European unemployment rises. Absent South-North migration of the unskilled from 1970-90, Europe could have maintained the same wage with from one-eighth to one-fourth less unemployment.