High-skilled Labor Research Articles

Good for some, bad for others: US investors and non-trade issues in preferential trade agreements

Preferential trade agreements (PTAs) trigger investment through their commitment to a liberal market economy. Increasingly however, PTAs go far beyond liberalizing trade and investment flows. Especially controversial features included in most modern PTAs are environmental and labor standards. Do these standards affect business activity? If so, how do investors react to such non-trade issues in trade deals? The literature provides inconclusive findings about the impact of standards on foreign direct investment (FDI). Some contributors argue that strict standards decrease FDI, whilst others claim that environmental and labor protection increases productivity and, in consequence, inward investment. In all likelihood, the usage of aggregated FDI data, as is the case for most studies, causes confusion. I expect standards to influence investors’ decisions – but heterogeneously across sectors. Environmental and labor standards should reduce FDI in polluting and low-skilled labor endowed industries, but increase investment in environmentally clean and high-skilled labor abundant sectors. Based on an original dataset of environmental and social standards in trade agreements and at the sector-level disaggregated US-FDI data, I find robust support for my argument. The paper provides a more nuanced picture on the standards and investment nexus: Standards have no uniform effect on multinationals. Instead, they are good for some, but bad for other industries.

Robots, Reshoring, and the Lot of Low-Skilled Workers

We propose a theoretical framework to analyze the offshoring and reshoring decisions of firms in the age of automation. Our theory suggests that increasing productivity in automation leads to a relocation of previously offshored production back to the home economy but without improving low-skilled wages and without creating jobs for low-skilled workers. Since it leads also to increasing wages for high-skilled workers, automation-induced reshoring is associated with an increasing skill premium and increasing inequality. We develop a measure for reshoring activity at the macro-level and, using data from the world input output table, we provide evidence for automation-driven reshoring. On average, within manufacturing sectors, an increase by one robot per 1000 workers is associated with a 3.5% increase of reshoring activity. Using robots in countries with similar sectoral structure as an instrument, we find that an increase by one robot per 1000 workers causes a 2.5% increase of reshoring activity. We also provide the first cross-country evidence that reshoring is positively associated with wages and employment for high-skilled labor but not for low-skilled labor and that tariffs increase the degree of reshoring.

Robots, Reshoring, and the Lot of Low-Skilled Workers

We propose a theoretical framework to analyze the offshoring and reshoring decisions of firms in the age of automation. Our theory suggests that increasing productivity in automation leads to a relocation of previously offshored production back to the home economy but without improving low-skilled wages and without creating jobs for low-skilled workers. Since it leads also to increasing wages for high-skilled workers, automation induced reshoring is associated with an increasing skill premium and increasing inequality. Using a new measure of reshoring activity and data from the world input output table, we fi nd evidence for a positive association between reshoring and the degree of automation. On average, within manufacturing sectors, an increase by one robot per 1000 workers is associated with a 3.5% increase of reshoring activity. We also provide evidence that reshoring is positively associated with wages and employment for high-skilled labor but not for low-skilled labor.

Intra-country wage inequality in the OECD countries

Two reasons are mainly brought to explain the recent increase in intra-country wage inequality in favour of high-skilled labour: Skill-Biased Technological Change (SBTC) and International Trade Liberalisation (IT). Since few empirical studies have attempted to assess both interpretations across a comprehensive sample of countries, we have analysed the impact of both and added some new variables within a unified framework and across 30 OECD countries, between 2001 and 2015. Using panel data, results show that both explanations are crucial. However, considering all 30 OECD countries, the IT argument dominates. Further, we show that seven clusters must be considered in which at least one theory influence the wage gap.

The Lost Race Against the Machine: Automation, Education, and Inequality in an R&D-Based Growth Model

We analyze the effect of automation on economic growth and inequality in an R&D-based growth model with two types of labor: highskilled labor that is complementary to machines and low-skilled labor that is a substitute for machines. The model predicts that innovationdriven growth leads to increasing automation, an increasing skill premium, an increasing population share of graduates, increasing income and wealth inequality, a declining labor share, and (in an extension of the basic model) increasing unemployment. In contrast to Piketty's famous claim that faster economic growth reduces inequality, our theory predicts that faster economic growth promotes inequality.

(Structural Factors of Global Trade Slowdown and Their Implications)

Korean Abstract: 본 연구는 세계무역의 현황을 살펴보고 세계무역 변화의 구조적인 요인을 분석하여 우리나라 무역의 안정적 성장을 위한 정책적 시사점을 도출하기 위해 추진하였다. 이를 위해 세계투입산출 데이터베이스를 이용하여 세계무역의 구조 변화를 분석하고, 부가가치무역의 변동을 항목별로 분해하였다. 제2장에서는 2000년대 중반 이래의 세계무역 추이와 GDP 비중 등을 살펴보고 주요국별 및 주요 산업별 수출증가율의 변화를 살펴보았다. 제3장에서는 세계무역의 구조가 어떻게 변화하고 있는지를 살펴보았다. 제4장에서는 세계적 무역둔화 요인을 분해하기 위해 세계투입산출표를 이용하여 수출부가가치(VAX: value added exports)의 변화를 분해하였다. 제5장에서는 2017년 세계무역의 회복 요인을 평가하고 앞서의 분석 결과를 토대로 우리나라 무역에 대한 정책시사점을 도출하였다. 본 연구의 분석결과는 수출부가가치의 제고와 국내산업의 핵심역량 강화를 위한 정책 마련에 활용될 것으로 기대된다. English Abstract: The global trade slowdown since 2012 is reputed to be very astonishing in that it was unpredictable in terms of the magnitude. This trade slowdown was cyclical in that it mainly resulted from the global economic recessions especially in China and Europe. Also, this phenomena can be explained by structural reasons such as the fall in the income elasticity of trade, that is, the rise in income does not contribute to the trade expansion as it used to. This study aims to investigate the structural change in global trade mainly using the world input-output database and to decompose the change in value added exports into three relevant factors. This study reveals that the composition of global commodity demand has changed in recent years and the share of intermediate goods to the total import has declined as the low economic growth rate, low price level, high interest rate, and high unemployment rate have dominated the global economy since 2012. Chinese re-balancing turns out to have reduced the demand for import from the world as China, the global factory, transitioned from an export-oriented development strategy to policy focusing on domestic demand. The global value chain turns out to have diminished since the global financial crisis, thereby contributing to the global trade slowdown. The non-tariff barriers such as anti-dumping duties, TBT, and SPS, among others, have been more prevalent in recent years while the average tariff rates in most of the countries have been falling since the mid-1990s. On the other hand, this paper estimated value added exports (VAX) by using the World Input-Output Database released in 2016, in order to analyze causes of the recent global trade slowdown. We also decomposed the change in value added exports into the three factors of value-added coefficients, change in input structure, and change in final demands. According to the results, the change in value added exports in Korea are largely explained by the change in input structure, and change in value-added coefficients. Since 2012, the increase in final demands has played a major role in the recovery of value added exports at world level, while in Korea, increase in input structure explains more of rise in value added exports. That is to say, the change in value added export is cyclical at the world level, while structural in the case of Korea. The findings of this study indicate that it is crucial for Korea to reinforce the core competence of domestic industries in line with the following. First, Korean industries need to diversify their export products and gear up for standardization of parts and materials, thereby pursuing preemptive industrial restructuring. Second, Korean industries need to strengthen the knowledge intensity of high-skilled labor and make the best of global value chains. Third, the Korean government needs to support processes to improve transaction practices and incentive systems for large companies and small- and medium-sized companies, thereby establishing a fair market mechanism. Finally, the Korean government will need to contribute to multilateral as well as regional trade liberalization.

Co-constituting migrant strangers and foreigners: The case of Japan

This study examines the experiences of diverse groups of migrants in a highly developed non-Western society: Japan. Using critical analysis of literature and semi-structural interview data with 50 Japanese nationals and 109 foreign migrants, it explores how Japan, which sees itself as a relatively racially homogeneous society, operates in response to increasing demands for migrants, and how the structures of the state and interactions of dominant and migrant groups affect migrants’ security. It shows the salience of glocal racial ideologies creating an uneven terrain of migration for migrants from different parts of the world. Specifically, the Japanese state grants work visas for highly-skilled and specialized labor migrants as it maintains that it only accepts highly-skilled labor migrants, while opening a side-door to recruit Japanese descendants and trainees from the Global South as low-skilled laborers. This bifurcated visa structure reinforces racial hierarchies, where those who are perceived to be from Western societies are deemed as superior foreigners, while those who are from non-Western societies are seen as strangers who are a potential threat to the country’s moral standards. This hierarchy shapes their level of human security.

Reverse Outsourcing and Skill-biased Technical Change

Under the background of China's New Normal and new industrial revolution, China's economy urgently needs to realize the transformation of economic growth and upgrading of industrial structure through technical innovation, especially skill-biased technical change. According to the stylized facts that firms speed up overseas mergers and acquisitions in the post-financial crisis, this paper constructs a general equilibrium model including reverse outsourcing based on Ricardo framework, and theoretically confirms that reverse outsourcing as a new method of gathering global innovation resources by late-development countries can make up for a shortage of high-skilled labor in late-development countries and induce enterprises to use skill-labor-biased production technology, thereby playing a promotion role in skill-biased technical change in late-development countries. Based on the data of 16 sub-industries in manufacturing from 2003 to 2011, empirical analysis shows that reverse outsourcing dominated by local manufacturing enterprises significantly promotes skill-biased technical change in manufacturing, and FDI & the increase in human capital supply accelerate the formation and development of skill-biased technical change. This paper not only enriches current globalization theories about skill-biased technical change and reverse outsourcing, but also has important enlightenment to the transformation of new manufacturing mode and the adjustment to economic structure in China.

Effect of intra-industry trade on skill premium in manufacturing in China

In making use of the panel data in 27 manufacturing industries, this paper examines the recent increase in skill premium in China's manufacturing. The paper argues that the recent increase in skill premium in Chinese manufacturing can be partly attributed to the decline in intra-industry trade. A reasonable explanation on this is that the decline in intra-industry trade occurred in the period studied is associated with a decrease in output. This led to a reduction in relative demand of low-skilled workers, which supports the hypothesis of the output-skill substitutability, and finally an increase in skill premium. Further, this paper finds that the negative effect of intra-industry trade on skill premium is larger for high-skilled manufacturing than low-skilled manufacturing. One more result in this paper is that the increase in capital input reduced the skill premium in Chinese manufacturing. The empirical evidence is consistent with a modified model of intra-industry trade with differentiated products and three factor inputs: high-skilled labor, low-skilled labor and capital.

The impact of education expansion on wage inequality

ABSTARCTThe findings on education expansion and income inequality have important implications for policymakers to implement effective policies to reduce income inequality. This study attempts to explain how education expansion affects income inequality by education distribution and the rate of return to education. We decompose the effect of education expansion on wage gaps into price effect and structure effect. We compare the income inequality from 2002 to 2013 using the Chinese Household Income Project (CHIP) 2002 and CHIP2013 survey data and employ FFL decomposition method. Our findings suggest that income inequality increased in 2013 and that income inequality among the high-income groups increased even more significantly. The structure effect of education expansion on income inequality is negative, when average education increases one year, the income gap between 80th and 20th will decrease 1.2%, in other words, education expansion decreases income inequality by allowing a wide range of individuals to attend college. However, this effect is offset by the price effect, which is positive and much more significant in magnitude. One extra year of average education will increase income gap by 29% which means that the demand for high-skilled labour is increasing faster than the supply and thus lead to the increasing premium for higher education return.

Innovative partnerships resulting from high-skilled emigration

PurposeThis paper aims to examine whether emigration of high-skilled labor creates a positive effect in the home country by generating multi-country joint patent relationships between home and destination country-pairs.Design/methodology/approachA panel of data that uniquely captures the country of origin of patent applicants is used to assess if and how high-skilled emigration contributes to the prevalence of multi-country joint patents in a country. The analysis is conducted both in aggregate and across sub-samples based on the per capita income level of the home country. Finally, the role of absorptive capacity as a control variable is robustly considered.FindingsResults suggest that emigration of high-skilled labor positively impacts the prevalence of multi-country joint patent ownership when emigration originates from middle- and high-income countries. Support for such “brain gain” via knowledge sharing in innovation is absent when high-skilled labor emigrates from low-income countries.Originality/valueThe analysis highlights a specific avenue by which the home country benefits from high-skilled emigration. It also provides comparative analysis across home countries of different income levels, which can provide insight into the external validity of papers using high-income country samples of innovative performance when assessing knowledge spillovers.

Low-skilled labor markets as a constraint on business strategy choices: A theoretical approach

The characteristics of the environment in which a firm operates may be constraining a firm's choice of strategy in order to create and sustain a competitive advantage. In particular, we focus on the fact that the level of development of local human capital may be an important factor constraining the set of strategies that the firm may actually choose. Next, certain feasible strategies in a high-skilled labor market may become unfeasible in a low-skilled labor market. To illustrate this point, we propose a theoretical model in which the level of quality of a firm's product depends on effort exerted by local high-productivity workers. We show that the firm may choose to produce a low-quality product for sufficiently high costs of finding high-productivity workers and inducing them to exert effort to increase the quality of the product.

THE EFFECT OF REMITTANCES UPON SKILLED EMIGRATION: AN EMPIRICAL STUDY

1.INTRODUCTIONIn addition to increasing flows of trade and capital across countries, cross-border migration has also become more prevalent over the last 30 years. According to the United Nations (2013), 232 million migrants live across the world, and the pace of new migrants has increased. During the 1990's, the number of migrants increased on average by 2 million whereas this annual flow more than doubled to 4.6 million between 2000 and 2010. Emigration rates from low income to OECD countries are even higher for those individuals with a tertiary education. In fact, for countries like Haiti and Trinidad and Tobago, more highly educated citizens of these countries were living beyond their borders than within them.Income flows such as remittances have also greatly increased. Despite a fall in 2009 due to the Great Recession, the annual flow of remittances has almost tripled since 2000, was over $500 billion in 2014, and is estimated to have been $601 billion in 2016 (World Bank, 2015). Remittances account for 8% of GDP in low-income countries and around 2% in middle-income nations according to World Bank data. The World Bank also states that total remittances to low- and middle-income countries are nearly three times the amount of foreign aid to those countries (Mohapatra et al., 2010).Explaining links from migration to remittances is not difficult as a greater number of migrant workers increases their aggregate income and so increases the income that they can then remit to their home countries. In examining the determinants of remittances, studies such as Faini (2007) and Niimi et al. (2010) consider to what extent migration impacts remittances and how impacts could differ across different skill levels. But does causality go in the other direction as well? Do remittances affect the level of emigration? Remittances could lower emigration as the potential to receive income from abroad might lower the emigration of entire households as only some members of the household need to emigrate so as to increase household income. To the extent that inflows of remittances spur (curb) economic growth, emigration might also be curtailed (raised) since there is less (more) impetus to move (Buckley and Hofmann, 2012; Czaika and Spray, 2013; Feeney at al., 2014; Uprety, 2017a, b). On the other hand, remittances might also increase emigration. The increase in income that remittances provide could help make migrating easier as families could now afford transportation costs as in Beyene (2014). The example of others remitting income back home could induce further immigration as other families follow in their footsteps. If remittances allow for more education, especially for the credit constrained, and if higher educated individuals are more likely to move out of poor countries then remittances could also influence migration by augmenting human capital within the household (Acharya and Leon-Gonzalez, 2014).Lahiri and Uprety (2016) consider another possibility and build a two-country model where remittances transfer income from a developed country to a developing country. These changes in income then influence the demand for differentiated goods relative to a homogenous good, the former using higher skilled labor than the latter. This induces high-skilled individuals to migrate to the developed country. The reason is that the loss of income in the developed country lowers the demand for the traditional good less than that for the modern good, thereby causing a relative increase in the production of the traditional good. Since the production of the traditional good now requires more labor and that lower skilled workers produce the traditional good, the marginal worker in the skill distribution moves rightward along the continuum in the developed country. Therefore, the wage for the marginal worker in the modern sector increases, inducing more migration from the developing to the developed country. Not only does this model predict that remittances lead to more emigration from the developing to the developed county but that it is the more highly skilled individuals who migrate. …

Growth Miracle or Endangered Development? Vested Interests, Policy-Making, and Economic Development in the Dominican Republic

:The Dominican Republic is often considered among the most successful developing countries, based primarily on its high and relatively sustained growth rates over the last two decades. On the other hand, indicators of human and social development, healthcare, and education have been particularly poor. I argue that the polarization of economic power plays an important role for this development. Furthermore, I analyze the structure of the Dominican economy in order to show that the country has relied on tourism, services, and special economic zones to obtain relatively high growth rates. These activities do not require high-skilled labor and will not allow the economy to generate high incomes for the population, but benefit a few families who control most conglomerates. In turn, this explains low investment in education and social spending, as well as low taxation rates.

The effects of european economic integration and the impact of Brexit on the uk immigrants from the CEE countries

Considering the debates regarding lower increase in the economic growth after Brexit, the main objective of this paper is to measure the positive impact of economic integration of Central and Eastern European (CEE) countries on the UK economy and the effect of Brexit on the immigration from these countries to the UK. The European Union membership of some CEE countries increased, in average, the number of the UK immigrants by 12 times in the period 2004-2014 compared to the group of countries formed by Russia and Ukraine. The empirical fi ndings show positive economic effects of immigration on the UK’s economy, even if the pro Brexit group claimed that a control of immigration is necessary. CEE countries emigrants stimulated the UK economic growth, price stability and reduced the homicide rate. The effects of immigration on the unemployment rate, health and education spending were positive, but very low. According to mixed-effects Poisson models estimations, after Brexit the number of the UK immigrants from the CEE countries that are member of the EU might decrease by 2 times. This signifi cant decline in immigration might impose austerity measures, because of the fall in the economic growth trend with negative impact on the UK economy. Therefore, we recommend policies that focus more on high-skilled labour force than on the reduction of the number of immigrants. The UK should propose measures to slow the expected immigration decline in order to alleviate economic issues like decline in economic growth, decrease in labour productivity, cutting backs on public services.

High-skilled labour mobility in Europe before and after the 2004 enlargement.

The extent to which international high-skilled mobility channels are forming is a question of great importance in an increasingly global knowledge-based economy. One factor facilitating the growth of high-skilled labour markets is the standardization of certifiable degrees meriting international recognition. Within this context, we analysed an extensive high-skilled mobility database comprising roughly 382 000 individuals from five broad profession groups (Medical, Education, Technical, Science & Engineering and Business & Legal) over the period 1997-2014, using the 13-country expansion of the European Union (EU) to provide insight into labour market integration. We compare the periods before and after the 2004 enlargement, showing the emergence of a new east-west migration channel between the 13 mostly eastern EU entrants (E) and the rest of the western European countries (W). Indeed, we observe a net directional loss of human capital from E → W, representing 29% of the total mobility after 2004. Nevertheless, the counter-migration from W → E is 7% of the total mobility over the same period, signalling the emergence of brain circulation within the EU. Our analysis of the country-country mobility networks and the country-profession bipartite networks provides timely quantitative evidence for the convergent integration of the EU, and highlights the central role of the UK and Germany as high-skilled labour hubs. We conclude with two data-driven models to explore the structural dynamics of the mobility networks. First, we develop a reconfiguration model to explore the potential ramifications of Brexit and the degree to which redirection of high-skilled labourers away from the UK may impact the integration of the rest of the European mobility network. Second, we use a panel regression model to explain empirical high-skilled mobility rates in terms of various economic 'push-pull' factors, the results of which show that government expenditure on education, per capita wealth, geographical proximity and labour force size are significant attractive features of destination countries.

High-Skilled Labor Mobility in Europe Before and After the 2004 Enlargement

The extent to which international high-skilled mobility channels are forming is a question of great importance in an increasingly global knowledge-based economy. One factor facilitating the growth of high-skilled labor markets is the standardization of certifiable degrees meriting international recognition. Here we analyze an extensive high-skilled mobility database comprising roughly 382,000 individuals from 5 broad profession groups (Medical, Education, Technical, Science & Engineering, and Business & Legal) over the period 1997-2014, using the 13-country expansion of the European Union (EU) to provide insight into labor market integration. We compare the periods before and after the 2004 enlargement, showing the emergence of a new East-West migration channel between the 13 mostly eastern EU entrants (E) and the rest of the western European countries (W). We indeed observe a net directional loss of human capital from E->W, representing 29% of the total mobility after 2004. Nevertheless, the counter-migration from W->E is 7% of the total mobility over the same period, signaling the emergence of brain circulation within the EU. Our analysis of the country-country mobility networks and the country-profession bipartite networks provides timely quantitative evidence for the integration and convergence of the EU. Moreover, our results highlight the United Kingdom's privileged access to Europe's large stocks of high-skilled labor. We conclude by exploring the potential ramifications of 'Brexit' on the connectivity of the mobility networks, showing that it may contribute to the convergence towards more homogeneous European brain circulation.

Effects of foreign acquisitions on R&D and high-skill activities

Using Swedish microdata, we find no evidence for the concerns circulating in the public debate that foreign acquisitions lead to reductions in both R&D expenditures and high-skilled activities in targeted domestic firms for either MNEs or non-MNEs. Previous studies have only focused on larger firms. In this paper, we are able to study the impact on smaller firms (fewer than 50 employees), which is important because 90% of the firms acquired by foreign enterprises meet this criterion. For this group of firms, there is no information on R&D, but by using the register of educational attainment, we obtain data on the share of high-skilled labour in all Swedish firms, irrespective of size. Interestingly, we find that among smaller firms, foreign enterprises tend to acquire high-productive, skill-intensive firms (cherry-picking). After the acquisitions, skill upgrading appears in acquired smaller, non-MNE firms, particularly in the service sector.

What is the Impact of Broadband Bandwidth Variability on Quality of Life?: Lessons from Sweden

What is the Impact of Broadband Bandwidth Variability on Quality of Life?: Lessons from Sweden

Emerging intra-urban geographies of the cognitive-cultural economy: Evidence from residential neighbourhoods in Dutch cities

Most existing research on advanced economic activities focuses on either inner city milieus or suburban industrial parks. We contend, however, that residential neighbourhoods constitute a milieu for economic activities which require the input of high-skilled labour or, to follow Allen Scott, cognitive-cultural activities which are characteristic for contemporary urban economies. Based on a longitudinal data set of company-level data, we show that a significant share of economic activities in urban residential neighbourhoods can indeed be classified as cognitive-cultural and that this share has been growing over the period 1999–2008. We present an analysis of the spatiality of the embeddedness of these activities. In particular, we focus on their traded and untraded interdependencies. For this part of the analysis, we use survey data of 370 businesses based in Dutch residential neighbourhoods. Overall, cognitive-cultural activities maintain many untraded interdependencies on a local level, whereas they maintain most traded interdependencies on a supra-local level. They appear to be making frequent use of both local buzz as well as of supralocal ‘pipelines’, and are thus embedded on various spatial scales. Residential neighbourhoods, then, have to be taken more seriously not just as places of consumption but also as milieus of production for more advanced economic activities.