Essays on International Trade and Factor Movements

The following collection of papers explores the increasing global mobility of production factors, with a particular focus on the impact of this mobility on U.S. workers. Each of the papers exploits detailed information on the types of production activities that U.S. workers engage in and investigates the relative vulnerability of workers to global forces due to the features of these activities. The first paper explores the impact of offshoring on U.S. workers. It is motivated by the fact that the potential for significant and ever-increasing productivity gains due to the offshoring of production tasks has recently been noted in the theoretical trade literature. In order to estimate the impact of offshoring on U.S. employment while accounting for these potential gains, the paper first extends the model of tasks offshoring introduced in Grossman and Rossi-Hansberg (2008) to a continuum of sectors with sector-level heterogeneity in the intensity of use of offshorable tasks. The model demonstrates that the effect of offshoring depends on the intensity of use of these tasks and, ultimately, impacts domestic employment through three channels: a direct employment effect, which negatively impacts employment; an output effect generated by the productivity gain from offshoring, which reorganizes and increases aggregate production in the economy and impacts domestic employment positively; and a substitution effect among factors and tasks, which has an ambiguous effect. In addition, the model predicts that the output effect may be increasing in the extent of previous offshoring under given conditions suggesting that, if these conditions hold, offshoring may be employment-enhancing in the long run. Using the model's structure as a roadmap and applying it to U.S. manufacturing sector data over 1997-2007, results from GMM 3SLS regressions provide overall support for the structure and predictions of the tasks model of offshoring.;The second paper, joint with Giovanni Peri and Gianmarco Ottaviano, asks: how many "American jobs" have U.S.-born workers lost due to immigration and offshoring? Or, alternatively, is it possible that immigration and offshoring, by promoting cost-savings and enhanced efficiency in firms, have spurred the creation of jobs for U.S. natives? Again we consider a multi-sector version of the Grossman and Rossi-Hansberg (2008) model and we augment it to include immigrants with heterogeneous productivity in tasks. The model predicts that while cheaper offshoring reduces the share of natives among less skilled workers, cheaper immigration does not, but rather reduces the share of offshored jobs instead. Moreover, since both phenomena have a positive "cost-savings" effect they may leave unaffected, or even increase, total native employment of less skilled workers. Our model also predicts that offshoring will push natives toward jobs that are more intensive in communication-interactive skills and away from those that are manual and routine intensive. We test the predictions of the model and find evidence in favor of a positive productivity effect such that immigration has a positive net effect on native employment while offshoring has no effect on it. We also find some evidence that offshoring has pushed natives toward more communication-intensive tasks while it has pushed immigrants away from them.;Lastly, the third paper explores the impact of domestic outsourcing in generating geographic concentration of production activities. This is motivated, first, by the fact that improvements in information and communications technologies increasingly facilitate the outsourcing of tasks by firms. Since the firm's choice of suppliers will depend on cost considerations, any task-specific productivity advantage in a location may lead to agglomeration, as firms choose to outsource their performance of that task to the most efficient workers. The paper focuses specifically on labor market spillovers as one such productivity advantage, and assesses empirically the importance of the search for spillovers in the outsourcing decisions of firms. The empirics are motivated via a probabilistic model of the firm's task location decision and are implemented with data on workers, tasks and domestic outsourcing by U.S. firms. The results suggest that increased outsourcing is associated with agglomeration, particularly of the most routine production tasks as well as those requiring minimal human interaction.