This paper investigates the resource reallocation effected by content protection and content preference schemes under alternative assumptions regarding the definition of domestic content, the number of intermediate goods, and the market structure of the domestic intermediate good industry. Content protection is shown to be equivalent to a combination of more familiar commercial policies. However, the extent of application of these policies is determined endogenously by parameters of the production functions for intermediate and final goods. A number of anomalous and undesirable outcomes that may result from content protection and content preference are discussed.

Separate demand equations for imports from less-developed countries (LDCs) and imports from developed countries (DCs) were estimated for each of eleven representative product groups. Imports were found to compete quite readily with domestically produced goods, with plausible own-price and cross-price elasticities. Whereas the quantity of each type of import was found to be quite responsive to changes in the price of US home goods, each appears to be less sensitive to the price of the alternative import. An explanation that is consistent with this observation, and that finds support from detailed industry information, is that DCs and LDCs supply goods that are at different stages in the product or technology cycle, whereas US producers compete in all submarkets. This suggests that trade creation rather than trade diversion provides the predominant inroad for LDCs into the US market. 25 references, 3 tables.

In this paper we analyze the determinants of international movements of physical capital in a model with uncertainty and international trade in goods and securities. In our model, the world allocation of capital is governed, to some extent, by the asset preferences of risk-averse consumer-investors. In a one-good variant in the spirit of the MacDougall model, we find that relative factor abundance, relative labor force size, and relative production riskiness have separate but interrelated influences on the direction of equilibrium capital movements. These same factors remain important in a two-good version with Heckscher-Ohlin production structure. In this case, the direction of physical capital flow is determinate (unlike in a world of certainty) and may hinge on the identity of the factor that is used intensively in the industry with random technology.

I study the interaction between imperfect labor contracts and international trade in a setting in which workers have private information about their own abilities. When an individual’s contribution to firm output can be measured accurately in some activities but not in others, the most able workers select occupations in which their pay most closely reflects their own performance. In a world economy with two otherwise similar countries that have different distributions of talent, the country with the more heterogeneous labor force exports the good that is produced by the most talented individuals. In this country, trade exacerbates the “polarization” of the labor force and often worsens the distribution of income.

Abstract We characterize trade policies that result from political competition when assessments of well-being include both material and psychosocial components. The material component reflects, as usual, satisfaction from consumption. Borrowing from social identity theory, we take the psychosocial component as combining the pride and self-esteem an individual draws from the status of groups with which she identifies and a dissonance cost she bears from identifying with those that are different from herself. In this framework, changes in social identification patterns that may result, for example, from increased income inequality or heightened class or ethnic tensions, lead to pronounced changes in trade policy. We analyse the nature of these policy changes.

We study the determinants of the location of subcontracted activity in a general equilibrium model of outsourcing and trade. We model outsourcing as an activity that requires search for a partner and relationship-specific investments that are governed by incomplete contracts. The extent of international outsourcing depends inter alia on the thickness of the domestic and foreign market for input suppliers, the relative cost of searching in each market, the relative cost of customizing inputs and the nature of the contracting environment in each country.

We study the competition between two political parties for seats in a legislature. The parties have fixed positions on some issues, but vary their positions on others in order to attract votes and campaign contributions. In this context, we examine whether special interest groups are governed by an electoral motive or an influence in their campaign giving, and how their contributions affect the equilibrium platforms. We show that each party is induced to behave as if it were maximizing a weighted sum of the aggregate welfares of informed voters and members of special interest groups. The party that is expected to win a majority of seats caters more to the special interests.

We develop a model of repeated product improvements in a continuum of sectors. Each product follows a stochastic progression up a quality ladder.