WTI, University of Bern Hallerstrasse 6 CH-3012 Bern, Switzerland T +41 31 684 32 70 www.wti.org

WTI PhD COURSE , Labor Markets & Inequality 29 June – 09 July 2021

Professor: Douglas Nelson Office: Tilton 108 (Murphy Institute) Office Hours: Tuesday and Thursday, 3:30-5:30 Phone: +1 504 862-3208 email: [email protected] Webpage: http://nelson.wp.tulane.edu/

The relationship between and is an issue of first-rate significance scientifically, politically and socially. There is considerable evidence that, since sometime in the 1980s at the earliest, a fundamental change in globalization has occurred. These changes affect both the distribution of economic activity and the returns from that activity, both between and within nations. The rise of anti-global populism around the world renders these issues even more important. Trade and migration seem to be the two flash-points for these politics.

The appropriate theoretical and empirical tools for the study of these issues is distributed more- or-less equally between trade and labor economics. Work in these fields is often seen as in conflict. In this course, although the main focus will be on trade, we will also develop some of the main lines of research on the labor market effects of migration, in both cases emphasizing the links between theoretical and empirical research.

Evaluation: Your performance in this course will be evaluated on the basis of class participation (worth 20%), presentation of published papers (worth 30%); and a research paper (worth 50%).

Readings for the course will be drawn from the classic and current research papers on the topics. The attached syllabus contains live links to those papers.

Class participation. This course is intended to be a seminar. That is, while I will present lectures on basic background and results in each topic, I expect there to be active discussion of the assigned material.

Presentation of published papers. There are far more papers on the syllabus than we can discuss in any detail. However, partly as a way to induce discussion and partly to develop the skills of presentation that you will need as professional academics, everyone will present at least one of the research papers on the syllabus. Depending on the number of people registered, we

might be able to get two presentations per person.

Research paper. Every member of the course is required to produce a research paper on some aspect of the effect of globalization on labor markets and/or international inequality. These papers must be original work, plagiarism will not be tolerated. Broadly speaking, I expect papers in the 25-35 page range. To ensure that topics are well-established and suitable for the course, I require a proposal due no later than the fifth meeting of the course. You are unclear. But don't wait until the last minute, by then it is usually too late.

Timetable. 10 lectures: Total No. of hours: 25 hours. 4 ECTS. Class hours are 16:00pm- 18:30pm, Monday – Friday, from Monday 28.06 – Friday 09-07. This is an intensive course. Please try to do (some) readings already before the course-week starts.

2

SYLLABUS 29 June–09 July 2021

Lecture 1: Course Introduction & Review of Basic Frameworks

○ Milanovic (2016). Global Inequality: A New Approach for the Age of Globalization. [Chapters 1-3] ○ Morelli, Smeeding and Thompson (2015). “Post-1970 Trends in within-Country Inequality and : Rich and Middle-Income Countries,” in Atkinson and Bourguignon eds, Handbook of Income Distribution. Amsterdam: Elsevier, 593-696. ○ Anand and Segal (2015). “The Global Distribution of Income,” in Atkinson and Bourguignon eds, Handbook of Income Distribution. Amsterdam: Elsevier, 937-79. ● Katz and Autor (1999). “Changes in the Wage Structure and Earnings Inequality,” in O. C. Ashenfelter and D. Card, eds, Handbook of Labor Economics. Amsterdam: Elsevier, 1463-1555. ○ Acemoglu and Autor (2011). “Skills, Tasks and Technologies: Implications for Employment and Earnings,” in D. Card and O. C. Ashenfelter eds, Handbook of Labor Economics. Amsterdam: Elsevier, 1043-1171. ● Autor (2013). “The ‘Task Approach’ to Labor Markets an Overview.” Journal of Labor Market Research, V.3, 185-99. ○ Costinot and Rodríguez-Clare (2015). “Trade Theory with Numbers: Quantifying the Consequences of Globalization,” in E. Helpman, K. S. Rogoff and G. Gopinath eds, Handbook of International Economics. Elsevier, 197-261.

Lecture 2: Traditional GE of Trade & Wages

● Jones (1965). “The Structure of Simple General Equilibrium Models.” Journal of Political Economy, V.73-#6, 557-72. ● Jones and Scheinkman (1977). “Relevance of 2-Sector Production Model in Trade Theory.” Journal of Political Economy, V.85-#5, 909-35. ○ Jones (1971). “A Three Factor Model in Theory, Trade and History,” in J. Bhagwati, R. W. Jones, R. A. Mundell and J. Vanek eds, Trade, Balance of Payments and Growth: Essays in Honor of Charles P. Kindleberger. Amsterdam: North-Holland, 3-21.

Lecture 3: Economy-wide Empirics on Effects of Globalization

● Borjas, Freeman and Katz (1997). “How Much Do Immigration and Trade Affect Labor Market Outcomes?” Brookings Papers on Economic Activity, -#1, 1-90. ● Borjas (2003). “The Labor Demand Curve Is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market”. Quarterly Journal of Economics, 118(4), pp. 1335-74. ● Ottaviano and Peri (2012). “Rethinking the Effect of Immigration on Wages.” Journal of the European Economic Association, 10(1), 152-97 (esp. 185-197). ○ Deardorff and Staiger (1988). “An Interpretation of the Factor Content of Trade”. Journal of International Economics; V.24-#1/2, pp. 93-107. ○ Leamer (2000). “What’s the Use of Factor Contents?” Journal of International

3

Economics, V.50-#1, 17-49. ○ Krugman (2000). “Technology, Trade and Factor Prices.” Journal of International Economics, V.50-#1, 51-71. ○ Deardorff, (2000). “Factor Prices and the Factor Content of Trade Revisited: What’s the Use?” Journal of International Economics, V.50-#1, 73-90. ○ Bensidoun, Jean and Sztulman (2011). “ and Income Distribution: Reconsidering the Evidence.” Review of World Economics, V.147-#4, 593-619. ○ Adão, Carrillo, Costinot, Donaldson and Pomeranz (2020). “International Trade and Earnings Inequality: A New Factor Content Approach,” NBER Working Paper, #28263. ○ Desjonqueres, Machin and van Reenen (1999). “Another Nail in the Coffin? Or Can the Trade Based Explanation of Changing Skill Structures Be Resurrected?” The Scandinavian Journal of Economics, V.101-#4, 533-54. ○ Lawrence and Slaughter (1993). “International Trade and American Wages in the 1980s: Giant Sucking Sound or Small Hiccup?” Brookings Papers on Economic Activity. Microeconomics, V.1993-#2, 161-226. ● Baldwin and Cain (2000). “Shifts in Relative U.S. Wages: The Role of Trade, Technology, and Factor Endowments.” Review of Economics and Statistics, V.82-#4, 580-95. ○ Harrigan (2000). “International Trade and American Wages in General Equilibrium, 1967-1995,” in R. C. Feenstra ed The Impact of International Trade on Wages. Chicago: University of Chicago Press, 171-96. ○ Leamer (1997). “In Search of Stolper-Samuelson Effects on U.S. Wages,” in S. Collins ed Imports, Exports and the American Worker. Washington, DC: Brookings Institution, 141-214. ○ Hanson and Slaughter (2002). “Labor Market Adjustment in Open Economies: Evidence from US States.” Journal of International Economics, V.57-#1, 3-29. ○ Card and Lewis (2007). “The Diffusion of Mexican Immigrants During the 1990s: Explanation and Impacts,” in G. J. Borjas ed Mexican Immigration to the United States. Chicago: University of Chicago Press/NBER, 193-277. ○ Hijzen and Wright (2010). “Migration, Trade and Wages”. Journal of Population Economics; V.23-#4, pp. 1189-1211.

Lecture 4: Traditional GE of Trade & Unemployment

● Brecher (1974). “Minimum Wage Rates and the Pure Theory of International Trade”. Quarterly Journal of Economics; V.88-#1, pp. 98-116. ● Davis (1998). “Does European Unemployment Prop Up American Wages? National Labor Markets and Global Free Trade”. American Economic Review; V.88-#3, pp. 478- 494. ○ Diewert (1974). “The Effects of Unionization on Wages and Employment: A General Equilibrium Analysis”. Economic Inquiry; V.12-/3, pp. 319-339. ○ Hill (1984). “Comparative Statics in General Equilibrium Models with a Unionized Sector”. Journal of International Economics; V.16-#3/4, pp. 345-356. ● Gaston and Trefler (1995). “Union Wage Sensitivity to Trade and Protection: Theory and Evidence.” Journal of International Economics, V.39-#1–2, 1-25. ● Kreickemeier and Nelson (2006). “Fair Wages, Unemployment and Technological

4

Change in a Global Economy.” Journal of International Economics, V.70-#2, 451-69. ● Davidson, Martin and Matusz (1988). “The Structure of Simple General Equilibrium- Models with Frictional Unemployment.” Journal of Political Economy, V.96-#6, 1267- 93. ○ Davidson, Martin and Matusz. (1991). “Multiple Free Trade Equilibria in Micro Models of Unemployment.” Journal of International Economics, V.31-#1-2, 157-69. ● Davidson, Martin and Matusz (1999). “Trade and Search Generated Unemployment.” Journal of International Economics, V.48-#2, 271-99.

Lecture 5: Local Labor Market Shocks and Adjustment

● Card (1990). “The Impact of the Mariel Boatlift on the Miami Labor-Market”. Industrial & Labor Relations Review, 43(2), pp. 245-57. ● Borjas (2017). “The Wage Impact of the Marielitos: A Reappraisal.” Industrial & Labor Relations Review, V.70-#5, 1077-110. ● Peri and Yasenov (2019). “The Labor Market Effects of a Refugee Wave: Synthetic Control Method Meets the Mariel Boatlift.” Journal of Human Resources, V.54-#2, 267- 309. ○ Burstein, Hanson, Tian and Vogel (2020). “Tradability and the Labor-Market Impact of Immigration: Theory and Evidence from the United States.” Econometrica, V.88-#3, 1071-112. ● Autor, Dorn and Hanson (2013). “The China Syndrome: Local Labor Market Effects of Import Competition in the United States.” American Economic Review, V.103-#6, 2121- 68. ● Feenstra and Sasahara (2018). “The ‘China Shock,’ Exports and U.S. Employment: A Global Input–Output Analysis.” Review of International Economics, V.26-#5, 1053-83. ● Feenstra, Ma and Xu (2019). “US Exports and Employment.” Journal of International Economics, V.120, 46-58. ○ Caliendo, Dvorkin and Parro (2019). “Trade and Labor Market Dynamics: General Equilibrium Analysis of the China Trade Shock.” Econometrica, V.87-#3, 741-835. ○ Bloom, Nicholas; Kyle Handley; Andre Kurman and Philippa Luck (2019). “The Impact of Chinese Trade on Us Employment: The Good, the Bad and the Debatable,” Stanford Economics working paper. ○ Dauth, Findeisen and Suedekum (2014). “The Rise of the East and the Far East: German Labor Markets and Trade Integration.” Journal of the European Economic Association, V.12-#6, 1643-75. ● Dustmann and Glitz (2015). “How Do Industries and Firms Respond to Changes in Local Labor Supply?” Journal of Labor Economics, V.33-#3, 711-50. ○ Becker and Muendler (2015). “Trade and Tasks: An Exploration over Three Decades in Germany.” Economic Policy, V.30-#84, 589-641. ○ Adão, Kolesár and Morales (2019). “Shift-Share Designs: Theory and Inference.” Quarterly Journal of Economics, V.134-#4, 1949-2010. ○ Chetverikov, Larsen and Palmer (2016). “IV Quantile Regression for Group-Level Treatments, with an Application to the Distributional Effects of Trade.” Econometrica, V.84-#2, 809-33.

5

Lecture 6: Monopolistic Competition

○ Dixit and Stiglitz (1977). “Monopolistic Competition and Optimum Product Diversity.” American Economic Review, V.67-#3, 297-308. ● Krugman (1979). “Increasing Returns, Monopolistic Competition, and International Trade.” Journal of International Economics, V.9-#4, 469-79. ○ Krugman (1980). “Scale Economies, Product Differentiation, and the Pattern of Trade.” The American Economic Review, V.70-#5, 950-59. ○ Lovely and Nelson (2002). “Intra-Industry Trade as an Indicator of Labor-Market Adjustment”. Weltwirtschaftliches Archiv; V.138-#2, pp. 179-206. ● Epifani and Gancia (2008). “The Skill Bias of World Trade.” The Economic Journal, V.118-#530, 927-60. ● Dinopoulos, Syropoulos, Xu and Yotov. (2011). “Intraindustry Trade and the Skill Premium: Theory and Evidence.” Journal of International Economics, V.84-#1, 15-25. ○ Ethier (1982). “National and International Returns to Scale in the Modern Theory of International Trade.” American Economic Review, V.72-#3, 389-405. ○ Francois and Nelson (2002). “A Geometry of Specialisation.” Economic Journal, V.112-#481, 649-78.

Lecture 7: Heterogeneous Workers

● Grossman and Maggi (2000). “Diversity and Trade.” American Economic Review, V.90-#5, 1255-75. ○ Grossman (2004). “The Distribution of Talent and the Pattern and Consequences of International Trade.” Journal of Political Economy, V.112-#1, 209-39. ● Ohnsorge and Trefler (2007). “Sorting It Out: International Trade with Heterogeneous Workers.” Journal of Political Economy, V.115-#5, 868-92. ○ Bombardini, Gallipoli and Pupato (2012). “Skill Dispersion and Trade Flows.” American Economic Review, V.102-#5, 2327-48. ● Costinot and Vogel (2010). “Matching and Inequality in the World Economy.” Journal of Political Economy, V.118-#4, 747-86. ○ Grossman, Helpman and Kircher (2017). “Matching, Sorting, and the Distributional Effects of International Trade.” Journal of Political Economy, V.125-#1, 224-64.

Lecture 8A: Heterogeneous Firms

○ Melitz (2003). “The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity.” Econometrica, V.71-#6, 1695-725. ○ Demidova, and Rodríguez-Clare (2013). “The Simple Analytics of the Melitz Model in a Small Economy.” Journal of International Economics, V.90-#2, 266-72. ● Felbermayr, Prat and Schmerer (2011). “Trade and Unemployment: What Do the Data Say?” European Economic Review, V.55-#6, 741-58. ○ Felbermayr, Prat and Schmerer (2011). “Globalization and Labor Market Outcomes: Wage Bargaining, Search Frictions, and Firm Heterogeneity.” Journal of Economic Theory, V.146-#1, 39-73. 6

● Trefler (2004). “The Long and Short of the Canada – U.S. Free Trade Agreement.” American Economic Review, V.94-#4, 870-95. ○ Amiti and Davis (2012). “Trade, Firms, and Wages: Theory and Evidence.” The Review of Economic Studies, V.79-#1, 1-36. ○ Egger and Kreickemeier (2012). “Fairness, Trade, and Inequality.” Journal of International Economics, V.86-#2, 184-96. ○ Egger, Egger and Kreickemeier (2013). “Trade, Wages, and Profits.” European Economic Review, V.64-#0, 332-50. ○ Uysal, Yotov and Zylkin (2015). “Firm Heterogeneity and Trade-Induced Layoffs: An Empirical Investigation.” European Economic Review, V.75, 80-97.

Lecture 8B: Heterogeneous Firms & Workers

○ Davidson, Matusz and Shevchenko (2008). “Globalization and Firm Level Adjustment with Imperfect Labor Markets.” Journal of International Economics, V.75-#2, 295-309. ○ Davidson and Matusz (2012). “A Model of Globalization and Firm-Worker Matching: How Good Is Good Enough?” International Review of Economics & Finance, V.23, 5- 15. ○ Davidson, Heyman, Matusz, Sjöholm and Zhu (2014). “Globalization and Imperfect Labor Market Sorting.” Journal of International Economics, V.94-#2, 177-94. ○ Davidson, Heyman, Matusz, Sjöholm and Zhu (2016). “Global Engagement, Complex Tasks and the Distribution of Occupational Employment.” Review of International Economics, V.24-#4, 717-36. ○ Davidson, Heyman, Matusz, Sjöholm and Zhu (2017). “Global Engagement and the Occupational Structure of Firms.” European Economic Review, V.100, 273-92. ○ Davidson, Heyman, Matusz, Sjöholm and Zhu (2020). “Globalization, the Jobs Ladder and .” European Economic Review, V.127, 103444. ● Helpman and Itskhoki (2010). “Labour Market Rigidities, Trade and Unemployment.” Review of Economic Studies, V.77-#3, 1100-37. ○ Helpman, Itskhoki, Muendler and Redding (2017). “Trade and Inequality: From Theory to Estimation.” The Review of Economic Studies, V.84-#1, pp. 357-405. ○ Burstein and Vogel (2017). “International Trade, Technology, and the Skill Premium.” Journal of Political Economy, V.125-#5, 1356-412. ● Egger, Egger, Kreickemeier and Moser (2020). “The Exporter Wage Premium When Firms and Workers Are Heterogeneous.” European Economic Review, V.130, 103599. ○ Bombardini, Orefice and Tito (2019). “Does Exporting Improve Matching? Evidence from French Employer-Employee Data.” Journal of International Economics, V.117, 229-41.

Lecture 9: Second Unbundling–Value Chains, Tasks, etc.

A. Competitive GE & Monopolistic Competition

○ Feenstra and Hanson (1999). “The Impact of Outsourcing and High-Technology Capital on Wages: Estimates for the United States, 1979-1990.” The Quarterly Journal of

7

Economics, V.114-#3, 907-40. ○ Ethier (2005). “Globalization, Globalisation: Trade, Technology, and Wages.” International Review of Economics & Finance, V.14-#3, 237-58. ● Deardorff (2001). “Fragmentation in Simple Trade Models.” The North American Journal of Economics and Finance, V.12-#2, 121-37. ● Kohler (2003). “The Distributional Effects of International Fragmentation.” German Economic Review, V.4-#1, 89-120. ○ Kohler (2004). “International Outsourcing and Factor Prices with Multistage Production.” Economic Journal, V.114-#494, C166-C85. ○ Grossman and Helpman (2002). “Integration Versus Outsourcing in Industry Equilibrium.” Quarterly Journal of Economics, V.117-#1, 85-120. ○ Grossman and Helpman (2005). “Outsourcing in a Global Economy.” Review of Economic Studies, V.72-#1, 135-59. ○ Egger and Egger (2005). “Labor Market Effects of Outsourcing under Industrial Interdependence.” International Review of Economics & Finance, V.14-#3, 349-63. ○ Egger and Kreickemeier (2008). “International Fragmentation: Boon or Bane for Domestic Employment?” European Economic Review, V.52-#1, 116-32. ○ Geishecker and Görg (2008). “Winners and Losers: A Micro-Level Analysis of International Outsourcing and Wages.” The Canadian Journal of Economics, V.41-#1, 243-70.

B. Tasks and

○ Antràs, Garicano and Rossi-Hansberg (2006). “Offshoring in a Knowledge Economy.” Quarterly Journal of Economics, V.121-#1, 31-77. ● Grossman and Rossi-Hansberg (2008). “Trading Tasks: A Simple Theory of Offshoring.” The American Economic Review, V.98-#5, 1978-97. ○ Grossman and Rossi-Hansberg (2012). “Task Trade between Similar Countries.” Econometrica, V.80-#2, 593-629. ○ Artuç and McLaren (2015). “Trade Policy and Wage Inequality: A Structural Analysis with Occupational and Sectoral Mobility.” Journal of International Economics, V.97-#2, 278-94. ○ Wright (2014). “Revisiting the Employment Impact of Offshoring.” European Economic Review, V.66, 63-83. ○ Robert-Nicoud (2008). “Offshoring of Routine Tasks and (De)Industrialisation: Threat or Opportunity—and for Whom?” Journal of Urban Economics, V.63-#2, 517-35. ● Baldwin and Robert-Nicoud (2014). “Trade-in-Goods and Trade-in-Tasks: An Integrating Framework.” Journal of International Economics, V.92-#1, 51-62. ○ Egger, Kreickemeier and Wrona. (2015). “Offshoring Domestic Jobs.” Journal of International Economics, V.97-#1, 112-25. ○ Ottaviano, Peri and Wright (2013). “Immigration, Offshoring, and American Jobs.” American Economic Review, V.103-#5, 1925-59. ● Rojas-Romagosa (2012). “Wage Inequality in Trade-in-Tasks Models,” ms: CPB Netherlands Bureau for Economic Analysis. ○ Van Reenen (2011). “Wage Inequality, Technology and Trade: 21st Century Evidence.” Labour Economics, V.18-#6, 730-41. 8

○ Olney (2012). “Offshoring, Immigration, and the Native Wage Distribution.” The Canadian Journal of Economics, V.45-#3, 830-56. ● Baumgarten, Geishecker and Görg (2013). “Offshoring, Tasks, and the Skill-Wage Pattern.” European Economic Review, V.61, 132-52. ● Becker, Ekholm and Muendler (2013). “Offshoring and the Onshore Composition of Tasks and Skills.” Journal of International Economics, V.90-#1, 91-106. ● Goos, Manning and Salomons (2014). “Explaining Job Polarization: Routine-Biased Technological Change and Offshoring.” American Economic Review, V.104-#8, 2509-26. ○ Ebenstein, McMillan and Phillips (2013). “Estimating the Impact of Trade and Offshoring on American Workers Using the Current Population Surveys.” Review of Economics and Statistics, V.96-#4, 581-95. ● Hummels, Jørgensen, Munch and Xiang (2014). “The Wage Effects of Offshoring: Evidence from Danish Matched Worker-Firm Data.” American Economic Review, V.104- #6, 1597-629.

Lecture 10: New Economic Geography & International Inequality

● Krugman and Venables (1995). “Globalization and the Inequality of Nations.” Quarterly Journal of Economics, V.110-#4, 857-80. ○ Baldwin, Martin and Ottaviano (2001). “Global Income Divergence, Trade, and Industrialization: The Geography of Growth Take-Offs.” Journal of , V.6-#1, 5-37. ● Redding and Venables (2004). “Economic Geography and International Inequality.” Journal of International Economics, V.62-#1, 53-82. ○ Neary (2001). “Of Hype and Hyperbolas: Introducing the New Economic Geography.” Journal of Economic Literature, V.39-#2, 536-61. ○ Eaton and Kortum (2002). “Technology, Geography, and Trade.” Econometrica, V.70- #5, 1741-79. ○ Alvarez and Lucas (2007). “General Equilibrium Analysis of the Eaton–Kortum Model of International Trade.” Journal of Monetary Economics, V.54-#6, 1726-68. ● di Giovanni, Levchenko and Zhang (2014). “The Global Welfare Impact of China: Trade Integration and Technological Change.” American Economic Journal: Macroeconomics, V.6-#3, 153-83.

9