A sample of Iowa farm couples is used to evaluate whether off-farm labor supply decisions respond to permanent and transitory components of farm income. Off-farm labor supply of both spouses declines in response to increases in permanent farm income. Farm wives also reduce off-farm labor supply in response to positive transitory farm income shocks. Consequently, one mechanism farm households use to smooth their goods consumption when facing fluctuating farm income is to modify their consumption of leisure. Ability to smooth goods consumption does not imply the absence of liquidity constraints among farm households unless leisure consumption is also smoothed.
Many developing countries (LDCs) still impose a local content requirement (LCR) regulation on multinational enterprises (multinationals). The authors develop a simple model to investigate whether the introduction of an LCR affects a multinational's choice of technology transfer. The key assumption made in their analysis is that the multinational in an LDC prefers importing intermediate inputs from its home country, for the manufacture of final goods, to purchasing them from local suppliers equipped with outdated technology. However, the LCR of the LDC forces the multinational to purchase a fixed proportion of its intermediate inputs. The authors show that the magnitude of an LCR policy cannot affect the multinational's decision regarding technology transfer under technology diffusion. In addition, an increase in the LCR may foreclose technology diffusion because it could make the multinational establish its own intermediate input supplier(s) and become a vertically integrated multinational. Copyright � 2008 The Authors. Journal compilation � 2008 Blackwell Publishing Ltd.
The effects of offshoring threats on the domestic skill premium are widely accepted, but theoretically unanalyzed. This study constructs a simple theoretical model based on tasktrading offshoring and collective wage bargaining models to examine the effects of a firm's offshoring threat on the domestic skill premium. Theoretical analysis suggests that under a moderate demand for the final good, the possibility of offshoring could lower the wages of unskilled domestic workers, who are vulnerable to offshoring, more than the wages of skilled domestic workers. Thus, even when there is no actual offshoring, the skill premium between the two types of workers increases.
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