U.S. Production Technology and the Effects of Imports on the Demand for Primary Factors

Abstract

We employ a unit cost function, in the context of the production theory approach, to estimate the Allen-Uzawa effect of various categories of imports on U.S. primary factors. To circumvent curvature-related problems, often associated with similar studies that do not invoke separability, we combine the global imposition of concavity with a symmetric normalized quadratic representation of the unit cost function (which remains flexible after curvature enforcing reparameterizations). Challenging conventional wisdom, we find that the positive, downstream- production-related, employment effects of the majority of imports are significant enough to produce a detectable net increase in labor demand.