The Strong-Factor-Intensity Hypothesis: A Multisectoral Test

Moroney, John R.

doi:10.1086/259275

Cited by 16 publications

(20 citation statements)

References 17 publications

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“…This assumption, however, poses a serious empirical challenge because little evidence for the so‐called ‘factor intensity reversal' has been found in manufacturing industries in past empirical studies (Leontief, ; Ball, ; Moroney, ), thus supporting Samuelson's (1951–1952) impression that a factor intensity reversal has much less empirical importance than theoretical interest.…”

Section: Our Alternative Resolutionsmentioning

confidence: 99%

A Survey of Trade and Wage Inequality: Anomalies, Resolutions and New Trends

Kurokawa

2012

Journal of Economic Surveys

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This paper surveys recent studies on trade and wage inequality. We first introduce some trade-based explanations for increased wage inequality. There are, however, a number of criticisms of this line of thought based on the 'trade-wage inequality anomaly', the 'price-wage anomaly', and the small volume of trade. Mainly due to these criticisms, trade-based explanations for rising wage inequality have been limited in the economic literature. Rather, the primary explanations for wage inequality have been based on skill-biased technological change. Some trade models, however, have weakened the above criticisms, and more economists now argue that the effect of trade, though relatively small compared to that of technological change, is more significant than generally believed. Finally, we attempt to link new trends in inequality, such as job polarization and within-group inequality, to the trade and wage inequality literature. Increased Trade and Increased Wage InequalityAs Figure 1 shows, the relative wage of high-skilled to low-skilled workers began to increase in US manufacturing industries in the late 1980s, and this phenomenon was also observed in Mexico. 1 As can be seen, these two countries showed surprisingly similar movements in relative wages in the late 1980s and early 1990s. 2 What is the cause of this recent increase in wage inequality in these countries?The data also indicate that, as shown in Figure 2, US-Mexican trade as a percentage of US GDP increased dramatically during the same period. 3 Hence, this increased trade might have contributed to the recent increase in skill premiums in both countries. 4 Past studies, such as Wood (1994), have investigated the possible relationship between trade and wage inequality. It is still a topic of interest and heated debate among economists.However, there are a number of criticisms of trade-based explanations for increased wage inequality. One criticism is based on the 'trade-wage inequality anomaly' -a discrepancy between the standard Heckscher-Ohlin (H-O) model and the data. According to the H-O model, the relative wage of highskilled to low-skilled workers should increase in the high-skill abundant US but decrease in low-skill abundant Mexico after trade liberalization. However, as we have seen in Figures 1 and 2, the data show that the wage inequality increased along with the increase in trade in both countries in the late 1980s and early 1990s. This is the 'trade-wage inequality anomaly'.A second criticism is based on the 'price-wage anomaly' -another discrepancy between the standard H-O model and the data. In the H-O model, an increase in the relative wage of high-skilled to low-skilled workers should be driven by an increase in the relative price of high-skill to low-skill intensive goods in the high-skill abundant US. This price-wage linkage is known as the Stolper-Samuelson theorem of the in the 1980s led to an increase in the demand for high-skilled workers, who were complements for this equipment, and a decrease in the demand for low-skilled workers, wh...

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Section: Our Alternative Resolutionsmentioning

confidence: 99%

A Survey of Trade and Wage Inequality: Anomalies, Resolutions and New Trends

Kurokawa

2012

Journal of Economic Surveys

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“…This is because little evidence for the so-called "factor intensity reversal" has been found in manufacturing industries in past empirical studies (Leontief, 1964;Ball, 1966;Moroney, 1967), thus supporting Samuelson's (1951Samuelson's ( -1952 impression that a factor intensity reversal has much less empirical importance than theoretical interest.…”

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confidence: 97%

Is a skill intensity reversal a mere theoretical curiosum? Evidence from the US and Mexico

Kurokawa

2011

Economics Letters

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“…Additionally, no explicit link with factor abundance is sought, as for instance in Moroney (1970). One goal of the present study is to show how commonly available production data can be fashioned into a general equilibrium model of production.…”

Section: Factor Intensitiesmentioning

confidence: 99%

“…Only U.S. factor intensities are used in the present study, and no effort is made to develop a two country model including Mexico's factor intensities. Additionally, no explicit link with factor abundance is sought, as for instance in Moroney (1970). One goal of the present study is to show how commonly available production data can be fashioned into a general equilibrium model of production.…”

Section: Factor Intensitiesmentioning

confidence: 99%

NAFTA and Industrial Adjustment: A Specific‐Factors Model of Production

Thompson

1996

Growth and Change

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The North American Free Trade Agreement (NAFTA) will continue to attract political debate as U.S. manufacturing industries adjust in the face of increased import competition and export opportunities. This study applies the specific factors model of production to manufacturing industries in Alabama to examine the pending adjustment. As industrial prices change, there will be small output adjustments in the short run and downward pressure on the wages of production workers. Projected changes in industrial investment will lead to substantial long-run output adjustments. his paper focuses on predicting industrial adjustments and income redistribu-T tion in Alabama manufacturing. The critical question is what will happen to industrial prices. Some industries will experience increasing import competition and falling prices, some will experience rising prices through increased export demand, while others will experience increased intraindustry (two way trade and no predictable price trend.The present study applies the specific factors model of production in which each industry has its own particular capital input. Manufacturing survey data are used to derive factor shares and industry shares for production workers, nonproduction workers, and capital in seventeen manufacturing industries. Factor intensity is used as a basis for projecting the direction of trade and price changes, which cause outputs to adjust as labor moves between industries. These short run output changes are predicted to be small by the specific factors model.In the long run, investment will shift across industries. The return to capital in an industry is positively related to the price of output in the industry.

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The Strong-Factor-Intensity Hypothesis: A Multisectoral Test

Cited by 16 publications

References 17 publications

A Survey of Trade and Wage Inequality: Anomalies, Resolutions and New Trends

A Survey of Trade and Wage Inequality: Anomalies, Resolutions and New Trends

Is a skill intensity reversal a mere theoretical curiosum? Evidence from the US and Mexico

NAFTA and Industrial Adjustment: A Specific‐Factors Model of Production

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