T here are two chapters in the ERP that deal with globalization, one on immigration and another on international trade. Both are topics that have given the Bush Administration heartburn. Before 9/11, the administration upset Republican lawmakers by suggesting it might endorse an amnesty to illegal immigrants. After 9/11, and the discovery that several of the hijackers were in the country illegally, discussion of an amnesty was quietly shelved. On trade, the first Bush term witnessed conflict with Europe over U.S. tariffs on imported steel and tax subsidies to U.S. exporters, outcry over former CEA chairman Gregory Mankiw's approving remarks on global outsourcing by U.S. companies, and battles in Congress over the Central American Free Trade Agreement and other proposed trade treaties. This legacy may account for the somewhat defensive tone the

We use the 1990 and 2000 Mexican and U.S. population censuses to test Borjas's negative‐selection hypothesis that the less skilled are those most likely to migrate from countries with high skill premia/earnings inequality to countries with low skill premia/earnings inequality. We find that Mexican immigrants in the United States are more educated than nonmigrants in Mexico; and were Mexican immigrants to be paid according to current skill prices in Mexico, they would be concentrated in the middle of Mexico's wage distribution. These results are inconsistent with the negative‐selection hypothesis and instead suggest that there is intermediate selection of immigrants from Mexico.

In recent decades, growth of world trade has been driven largely by rapid growth of trade in intermediate inputs. Much of input trade involves multinational firms locating input processing in their foreign affiliates, thereby creating global vertical production networks. We use firm-level data on U.S. multinationals to examine trade in intermediate inputs for further processing between parent firms and their foreign affiliates. Among our main findings are that demand for imported inputs is higher when affiliates face lower trade costs, lower wages for less-skilled labor, and lower corporate income tax rates.

In this paper, we develop a simple model of international outsourcing and apply it to processing trade in China.We observe China's processing exports broken down by who owns the plant and by who controls the inputs the plant processes.Multinational firms engaged in export processing in China tend to split factory ownership and input control with managers in China: the most common outcome is to have foreign factory ownership but Chinese control over input purchases.To account for this organizational arrangement, we appeal to a property-rights model of the firm.Multinational firms and the Chinese factory managers with whom they contract divide the surplus associated with export processing by Nash bargaining.Investments in input search, production, and marketing are partially relationship specific.In our benchmarks estimates, this relationship specificity is lowest in southern coastal provinces, where export markets are thickest, and highest in interior and northern provinces.The probability contracts are enforced has a similar pattern and is the lowest along the southern coast and the highest in the north.

the 1970s there was no organized effort to keep Kiss, or other immigrant-headed bands such as Abba or the Village People, out of the United States.) In a similar fashion, pressure from U.S. farmers and other employers may account for why it is that each year 300,000 illegal immigrants succeed in entering and finding work in the United States (Passel, Capps, and Fix 2004). For any presidential administration, globalization is likely to be a tricky subject. The gains from international economic integration are spread among a diffuse group of consumers, while the losses are concentrated in specific industries and regions. Into the debate, economists can interject dispassionate analysis of the costs and benefits associated with cross-border flows of goods, capital, and labor. On immigration and trade, the ERP gets many things right, but it falters when discussing the distributional consequences of globalization. This may be driven in part by the report's predictable but still discomforting tendency to cheerlead for the president's policy proposals. In the end, we are left with a discussion of globalization's consequences that is less balanced and complete than one might have hoped. REFERENCES

The Journal of Economic Literature (JEL) regularly reviews books of interest to the economics profession. The Economic Report of the President (ERP) falls under that purview and beginning this year, the JEL will be reviewing the ERP. Toward that end, I have asked a handful of very prominent economists to review the 2005 ERP. Reviewers were chosen to reflect expertise on what I guessed would be key issues. Reviewers were given the following instructions: The ERP in principle should provide an accurate assessment of the consensus professional views of economists on any given issue, based on the research to date. Does the discussion in the ERP in fact accurately summarize what we as economists know? Reviewers were given free rein over what material they would review in the ERP but were urged to focus on their areas of particular expertise. In the reviews that follow, Joel Slemrod reviews the discussion of tax reform. Joe Farrell reviews the ERP's chapter titled “Innovation and the Information Economy.” Gordon Hanson reviews the chapters on international trade and on immigration. Robert Hall reviews the discussion of the adverse macroeconomic impact of rising oil prices while Jonathan Gruber reviews the ERP chapter titled “Expanding Individual Choice and Control.” Many thanks to the reviewers for the quick turnaround.