Increasingly, a small number of low-wage countries such as China and India are involved in innovation -- not `big ideas' innovation, but the constant incremental innovations needed to stay ahead in business. We provide some evidence of this new phenomenon and develop a model in which there is a...

The incremental innovations that underly much of modern economic growth typically involve changes to one or more components of a complex product. This creates a tension. On the one hand, a principal would like an agent to contribute innovative components. On the other hand, ironing out...

The 19th century collapse of world sugar prices should have depressed wages in the British West Indies sugar colonies. It did not. We explain this by showing how lower prices weakened the power of the white planter elite and thus led to an easing of the coercive institutions that depressed wages...

The two models of international trade with developed factor markets -- Heckscher-Ohlin and Specific Factors -- both suffer significant defects. For example, their predictions about the patterns of domestic production and international trade are for the most part either indeterminate or uselessly...

Do scale economies contribute to our understanding of international trade? Do international trade flows encode information about the extent of scale economies? To answer these questions we examine the large class of general equilibrium theories that imply Helpman-Krugman variants of the Vanek...

We examine the impact on U.S. labor markets of offshore outsourcing in services to China and India. We also consider the reverse flow or 'inshoring' which is the sale of services produced in the United States to unaffiliated buyers in China and India. Using March-to-March matched CPS data for...

It has long been recognized that a country's tariffs are the endogenous outcome of a rent-seeking game whose equilibrium reflects national institutions. Thus, the structure of tariffs across industries provides insights into how institutions, as reflected in tariff policies, affect long-term...

We weigh into the debate about whether rising productivity is ever a consequence rather than a cause of exporting. Exporting and investing to raise productivity are complimentary activities. For lower-productivity firms, incurring the fixed costs of such investments is justifiable only if...

Within developing and newly industrialized countries, rising wage inequality is both common and highly correlated with export growth. This is incompatible with the Stolper-Samuelson theorem, but suggestive of a role for technological catch-up. We develop this insight using a model that features...

The Canada-U.S. Free Trade Agreement (FTA) provides a unique window on the effects of trade liberalization. It was an unusually clean trade policy exercise in that it was not bundled into a larger package of macroeconomic or market reforms. This paper uses the 1989-96 Canadian FTA experience to...