IDEAS home Printed from https://ideas.repec.org/a/eee/reveco/v60y2019icp281-291.html
   My bibliography  Save this article

The role of labor endowments on industry output in the short run: Evidence from U.S industries

Author

Listed:
  • Dogan, Can
  • Akay, Gokhan H.

Abstract

This paper investigates the effect of changing factor endowments on industry output using an extended version of specific factors model with skilled and unskilled labor as mobile factors. The theoretical model is calibrated with a parametric estimation of substitution elasticities of factor inputs in 29 US Industries. We show that output declines in some industries when skilled or unskilled labor endowment increases, a result that challenges findings of the standard specific factors model as well as the Rybczynski pattern with one type of labor. Our theoretical framework demonstrates that it is essential to allow for multiple mobile factors to analyze changes in output in the short run. We offer fully accurate predictions on the change of industry output in industries in which specific capital is substitute with one type of labor and complement with the other type.

Suggested Citation

  • Dogan, Can & Akay, Gokhan H., 2019. "The role of labor endowments on industry output in the short run: Evidence from U.S industries," International Review of Economics & Finance, Elsevier, vol. 60(C), pages 281-291.
    • Handle: RePEc:eee:reveco:v:60:y:2019:i:c:p:281-291
    DOI: 10.1016/j.iref.2018.10.017
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1059056018304271
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.iref.2018.10.017?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Lawrence F. Katz & Kevin M. Murphy, 1992. "Changes in Relative Wages, 1963–1987: Supply and Demand Factors," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(1), pages 35-78.
    2. Mussa, Michael, 1974. "Tariffs and the Distribution of Income: The Importance of Factor Specificity, Substitutability, and Intensity in the Short and Long Run," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1191-1203, Nov.-Dec..
    3. Bernardo S. Blum, 2010. "Endowments, Output, and the Bias of Directed Innovation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(2), pages 534-559.
    4. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1973. "Transcendental Logarithmic Production Frontiers," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 28-45, February.
    5. Gandal, Neil & Hanson, Gordon H. & Slaughter, M.J.Matthew J., 2004. "Technology, trade, and adjustment to immigration in Israel," European Economic Review, Elsevier, vol. 48(2), pages 403-428, April.
    6. Thompson, Henry, 1997. "Free trade and income redistribution across labor groups: Comparative statics for the U.S. economy," International Review of Economics & Finance, Elsevier, vol. 6(2), pages 181-192.
    7. Ulrich Kohli, 2002. "Migration and foreign trade: Further results," Journal of Population Economics, Springer;European Society for Population Economics, vol. 15(2), pages 381-387.
    8. Mayer, Wolfgang, 1974. "Short-Run and Long-Run Equilibrium for a Small Open Economy," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 955-967, Sept./Oct.
    9. Henry Thompson, 1989. "Do Tariffs Protect Specific Factors?," Canadian Journal of Economics, Canadian Economics Association, vol. 22(2), pages 406-412, May.
    10. Gordon H. Hanson & Matthew J. Slaughter, 1999. "The Rybczynski Theorem, Factor-Price Equalization, and Immigration: Evidence from U.S. States," NBER Working Papers 7074, National Bureau of Economic Research, Inc.
    11. Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
    12. Matthew F. Mitchell, 2005. "Specialization And The Skill Premium In The 20th Century," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(3), pages 935-955, August.
    13. Ronald W. Jones & Roy J. Ruffin, 2008. "Trade and Wages: a Deeper Investigation," Review of International Economics, Wiley Blackwell, vol. 16(2), pages 234-249, May.
    14. Ethan Lewis, 2005. "Immigration, Skill Mix, and the Choice of Technique," Working Papers 05-04, Center for Economic Studies, U.S. Census Bureau.
    15. Ruffin, Roy J., 1984. "International factor movements," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 5, pages 237-288, Elsevier.
    16. Dogan, Can & Akay, Gokhan H., 2016. "Multi-sector specific factors model with two mobile factors," International Review of Economics & Finance, Elsevier, vol. 46(C), pages 136-147.
    17. Ronald W. Jones, 1967. "International Capital Movements and the Theory of Tariffs and Trade," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 81(1), pages 1-38.
    18. Robert Z. Lawrence & Matthew J. Slaughter, 1993. "International Trade and American Wages in the 1980s: Giant Sucking Sound or Small Hiccup?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(2 Microec), pages 161-226.
    19. De Arcangelis, Giuseppe & Di Porto, Edoardo & Santoni, Gianluca, 2015. "Migration, labor tasks and production structure," Regional Science and Urban Economics, Elsevier, vol. 53(C), pages 156-169.
    20. repec:wly:soecon:v:80:2:y:2013:p:366-384 is not listed on IDEAS
    21. Rassekh, Farhad & Thompson, Henry, 1997. "Adjustment in General Equilibrium: Some Industrial Evidence," Review of International Economics, Wiley Blackwell, vol. 5(1), pages 20-31, February.
    22. Neary, J Peter, 1978. "Short-Run Capital Specificity and the Pure Theory of International Trade," Economic Journal, Royal Economic Society, vol. 88(351), pages 488-510, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gokhan Akay & Can Dogan, 2013. "The effect of labor supply changes on output: empirical evidence from US industries," Journal of Productivity Analysis, Springer, vol. 39(2), pages 123-130, April.
    2. Akay, Gokhan H., 2012. "Trade and factor returns: Empirical evidence from U.S. economy," International Review of Economics & Finance, Elsevier, vol. 21(1), pages 77-86.
    3. Sabine Engelmann, 2014. "International trade, technological change and wage inequality in the UK economy," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 41(2), pages 223-246, May.
    4. Noel Gaston & Douglas R. Nelson, 2013. "Bridging Trade Theory And Labour Econometrics: The Effects Of International Migration," Journal of Economic Surveys, Wiley Blackwell, vol. 27(1), pages 98-139, February.
    5. Thompson, Henry & Toledo, Hugo, 2022. "Renewable versus nonrenewable energy for Canada in a free trade agreement with China," Energy Economics, Elsevier, vol. 105(C).
    6. Dumont, Michel, 2004. "The Impact of International Trade with Newly Industrialised Countries on the Wages and Employment of Low-Skilled and High-Skilled Workers in the European Union," Thesis Commons bmxag, Center for Open Science.
    7. Paolo Epifani & Gino Gancia, 2008. "The Skill Bias of World Trade," Economic Journal, Royal Economic Society, vol. 118(530), pages 927-960, July.
    8. Ottaviano, Gianmarco & Peri, Giovanni, 2008. "Immigration and National Wages: Clarifying the Theory and the Empirics," CEPR Discussion Papers 6916, C.E.P.R. Discussion Papers.
    9. Gianmarco I. P. Ottaviano & Giovanni Peri, 2021. "Rethinking The Effect Of Immigration On Wages," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 9, pages 245-290, World Scientific Publishing Co. Pte. Ltd..
    10. Rotunno, Lorenzo & Wood, Adrian, 2020. "Wage inequality and skill supplies in a globalised world," Journal of Comparative Economics, Elsevier, vol. 48(3), pages 529-547.
    11. Lorenzo Rotunno & Adrian Wood, 2015. "Wages and endowments in a globalised world," Economics Papers 2015-W11, Economics Group, Nuffield College, University of Oxford.
    12. Jorge Saba Arbache, 2001. "Trade Liberalisation and Labor Markets in Developing Countries: Theory and Evidence," Studies in Economics 0112, School of Economics, University of Kent.
    13. Ariel Burstein & Javier Cravino & Jonathan Vogel, 2013. "Importing Skill-Biased Technology," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(2), pages 32-71, April.
    14. T. Huw Edwards & John Whalley, 2002. "Short and Long Run Decompositions of OECD Wage Inequality Changes," NBER Working Papers 9265, National Bureau of Economic Research, Inc.
    15. Feenstra, Robert C. & Lewis, Tracy R., 1994. "Trade adjustment assistance and Pareto gains from trade," Journal of International Economics, Elsevier, vol. 36(3-4), pages 201-222, May.
    16. Atolia, Manoj & Kurokawa, Yoshinori, 2016. "The impact of trade margins on the skill premium: Evidence from Mexico," Journal of Policy Modeling, Elsevier, vol. 38(5), pages 895-915.
    17. repec:ilo:ilowps:250014 is not listed on IDEAS
    18. Magee, Christopher S.P. & Davidson, Carl & Matusz, Steven J., 2005. "Trade, turnover, and tithing," Journal of International Economics, Elsevier, vol. 66(1), pages 157-176, May.
    19. Bernhard Heitger & Jürgen Stehn, 2003. "Trade, Technical Change, and Labour Market Adjustment," The World Economy, Wiley Blackwell, vol. 26(10), pages 1481-1502, November.
    20. repec:elg:eechap:15325_12 is not listed on IDEAS
    21. Elsner, Benjamin, 2013. "Emigration and wages: The EU enlargement experiment," Journal of International Economics, Elsevier, vol. 91(1), pages 154-163.
    22. Debaere, Peter & Li, Tianshu, 2017. "The Effects of Water Markets: Evidence from the Rio Grande," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 259187, Agricultural and Applied Economics Association.

    More about this item

    Keywords

    Specific factors model; Output change; Factor endowments; Elasticity of substitution;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:reveco:v:60:y:2019:i:c:p:281-291. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620165 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.