THIS paper explores empirically the hypothesis that product market imperfections affect the earnings of labor in U.S. manufacturing industries. To the extent that labor shares in the excess return due to product market power, any policies designed to reduce this power may restrain or reduce wages in the affected industry. Thus workers may oppose antitrust action aimed at their own industry. Workers may oppose increased import competition that restrains market power not only because of potential unemployment but also because this increased competition indirectly reduces future wages. In addition, measures of the social loss due to product market power are understated if some portion of costs are actually return to market power. The transfer from consumers to producers, including labor as a factor of production, is also understated. Past results attempting to isolate empirically the relation between product market power, usually represented by product market concentration, and labor earnings have been mixed. This paper argues and demonstrates that economic profitability is a superior measure to concentration in summarizing the relative extent of product market power across industries. After developing a model of the division of the total excess return available to an industry between labor and capital, the paper presents empirical results that support the hypothesis that excess return or economic profitability is superior to product market concentration in explaining the interindustry variation in wages. The results indicate that labor receives 7% to 14% of the total excess return. For empirical analysis other determinants of interindustry wage variation must be controlled. The first section of the paper briefly discusses certain relevant labor force characteristics. The second section examines the relationship between wages and product market power. The third section discusses the data and presents empirical results. If possible, variables are measured as four-year averages over 1967-1970, to avoid single-year disturbances in the data and to approach long-run equilibrium observations. The final section presents concluding comments.

If labor is able to capture a portion of the economic rents in profitable industries, industry profitability and the relation between market structure and profitability may both be mismeasured. This paper estimates a simultaneous equation system in which both the price-cost margin and compensation per worker (including fringe benefits) are endogenous variables. The authors' sample consists of eighty-five well-defined producer goods industries. They find that labor compensation does include some capture of economic rents. Further, when they correct for this rent capture, the relation between market concentration and the price-cost margin is strengthened significantly. Copyright 1991 by MIT Press.

This paper examines the cross-industry determinants of the importance of Japanese direct investment activities in U.S. manufacturing through an extension of the analysis in a recent article by Bruce Kogut and Sea Jin Chang (1991). The results indicate significant positive roles for Japanese technology and marketing assets. While U.S. technology assets are insignificant, a significant negative effect for U.S. marketing assets suggests that entry barriers related to marketing are more important than any use of foreign direct investment by Japanese firms to access these assets. In addition, U.S. government policies toward defense-oriented industries appear to act as a deterrent to Japanese direct investment. Copyright 1996 by MIT Press.

This paper examines the behavior of American corporations with respect to international trade policy initiatives during the 1970s using survey-generated data on revealed corporate trade policy interests and firmand industry-level data on company characteristics. Direct or proxy variables were developed and applied in linear regression equations using an ordered probit specification, and in an alternative approach using factor analysis to construct a composite dependent variable. Hypothesized relationships were verified between corporate positions on trade liberalization and the intensity of competition from imports, the benefits from improved access to foreign markets, and internal risk-pooling capabilities of firms. FIRMS exposed to the international competitive environment inevitably have a stake in national trade policy. This paper explores the revealed behavior of U.S. corporations on matters of trade policy in the 1970s. It develops a set of hypotheses linking corporate trade-policy positions to a series of company and industry attributes. These hypotheses are tested using survey-generated information regarding corporate behavior on trade policy matters beginning with the protectionist Burke-Hartke initiatives of the early 1970s through the post-Tokyo Round period at the end of the decade. Studies of the political economy of protection typically begin with the proposition that import barriers create rents that can be appropriated by the protected industry. The size of the rents to be obtained and their probable division among the various participants in the industry partly determine the intensity of protection-seeking behavior (lobbying) undertaken by participants in the industry (Brock and Magee, 1978). The intensity is also influenced by the degree of success expected in the political arena, and by imperfections in the lobbying process-for instance, the incentive to be a free-rider on the lobbying efforts of others (Walter and Jones, 1981). The actual outcome of protection-seeking activity is conditioned by a variety of political considerations as well. For instance, politicians may be constrained by the possibility of repercussions from groups adversely affected by protection, including consumers and export-oriented industries. Foreign competitors are also affected, so that issues concerning foreign relations enter into the decision process. In addition, politicians may be influenced more generally by ideology, party platforms, or attitudes toward equity. A number of researchers, including Ball (1967), Fieleke (1976), Clark (1980), and Ray (1981a, 1981b), have verified that a significant positive correlation exists between nominal tariff rates (or effective rates of protection) across manufacturing industries and low skilled-labor intensity, taken to be an indicator of the intensity of import competition and thus related to the size of the rents that could be obtained by protection.' Cheh (1974) and Bale (1977) analyzed the determinants of the percentage reductions in rates of duty resulting from the Kennedy Round tariff cuts, concluding that the cuts were determined in such a way as to minimize labor adjustment costs (see also Allen, Lewis, and Tower (1980)). Marvel and Ray (1983) also explored the determinants of Kennedy Round tariff cuts, finding the size of tariff cuts tended to be smaller if an industry was more concentrated or sold a larger fraction of its output to household consumers, and larger if the industry was more intensive in research and development (R & D) or more highly unionized. The result for R & D presumably represents the desire at the industry level for improved access to export markets achievable through larger reciprocal reductions in protection on the part of foreign countries. Along somewhat different lines, Baldwin (1976) analyzed several key Congressional votes on the Received for publication November 21, 1983. Revision accepted for publication December 14, 1984. *New York University. The authors are grateful to Robert Lipsey, Robert J. Levenson, J. Peter Jarrett, and James Green for providing data that contributed to this study, to Jang Ro Lee, Ashok Chatterjee, and Monica Kaufmann for research assistance, and to Bill Greene for providing advice on the estimation technique and computer program used to perform the statistical analysis. Thomas A. Pugel is also grateful for the support of an Esmee Fairbaim Research Fellowship at the University of Reading. 1 In both studies Ray also explores nontariff barriers (NTBs) across U.S. manufacturing industries. Aside from finding a positive relationship between tariff rates and NTBs, the results are not easily interpreted. However, there is some inferential evidence in Walter (1971), which finds a significant positive relationship between NTB incidence and (presumably relatively low-skill-intensive) developing country exports.