This page provides background information and suggested readings that I find useful in addressing these questions. Where possible I've also provided links to other important sources that can be accessed through the World Wide Web.

If you have suggestions for alternative sources that I haven't mentioned, please contact me; I'll update the page and credit your referral. I provide contact details at the bottom of this page.

    A.  Setting the stage.

        There are two features of recent US wage evolution that have labor economists worried.

• Hourly wage earnings have stagnated in real terms.
• The wage ratio between unskilled and skilled workers has declined.

The following diagram illustrates the evolution of the wage ratio for manufacturing and finance production sectors, and indicates the economists' fear that manufacturing workers are suffering disproportionately in this period of increased "global competitiveness".

    B.  Examining the theory:  what are potential causes?

    C.  Summarizing the empirical work on this question.

     D.  Three-part critique:

• The overstated role of globalization.
• The importance of recognizing that international outcomes are endogenous.
• The importance of the time frame in drawing these conclusions.

•     Bound, J. and G. Johnson:  "Changes in the structure of wages in the 1980s:  An Evaluation of Alternative Explanations", American Economic Review, June 1992, pp. 371-392.
•     Freeman, R.:  "Are your wages set in Beijing?", Journal of Economic Perspectives, Summer 1995, pp. 15-32.
•     Gottschalk, P.:  "Inequality, Income Growth and Mobility:  The Basic Facts", Journal of Economic Perspectives, Spring 1997, pp. 21-40.
•     Katz, L. and K. Murphy:  "Changes in Relative Wages, 1963-1987:  Supply and Demand Factors", Quarterly Journal of Economics, February 1992, pp. 35-78.
•     Sachs, J. and H. Shatz:  "Trade and Jobs in US Manufacturing", Brookings Papers on Economic Activity, 1994, pp. 1-84.
•     Wood, A.:  "How Trade Hurt Unskilled Workers", Journal of Economic Perspectives, Summer 1995, pp. 57-80.
•     Wood, A.:  "Globalization and the Rise in Labor Market Inequalities", Economic Journal, September 1998, pp. 1463-1482.

• "But for, as if, so what" - Paul Krugman, MIT
• Wage statistics - Bureau of Labor Statistics
• US trade deficits:  causes, consequences and policy implications - Rob Scott, Economic Policy Institute

Session 2. The Largest Debtor: the Importance of the US Financial Position in the World Markets.

    A.      The US international financial position.

    B.      When the US sneezes ...  our asymmetric position in financial markets.

    C.      Has the Asian financial crisis been good for the US?

    D.      Bringing the international financial market into economics classes.

    E.      Bibliography:

•     Radelet, S. and J. Sachs:  "The East Asian Financial Crisis:  Diagnosis, Remedies, Prospects", Brookings Papers on Economic Activity 1998/1, pp. 1-90.
•     IMF:  World Economic Outlook -- Globalization:  Opportunities and Challenges.  Washington, DC:  IMF, May     1997.
•     Krugman, P.: “Seven habits of highly defective investors”, Fortune, 29 December 1997.
•     The Economist: “Keeping the Hot Money Out”, January 1998.
•     Guitian, M.: “The Challenge of Managing Global Capital Flows”, Finance and Development 35/2, June 1998, pp. 14-17.

•     Nouriel Roubini's (NYU) page on the Asian financial crisis.
•     The IMF evaluation of world capital markets.
•     Paul Krugman on the Asian financial crisis:  capital controls
•     Jeff Sachs on the Asian financial crisis:  a new coordinated approach to replace the IMF.
•     President Clinton on the Asian financial crisis:  coordinating monetary policy.

Session 3. Putting Trade First: Internationalizing the Economics Curriculum

    A.      Supply and demand writ large:  the case of Harley-Davidson.

    B.      The advantages of thinking globally.
 

•     Labor markets and industrial organization:  the case of wages and trade.
•     Financial markets and monetary policy:  the case of global capital markets.

    C.      Examples from the group members.

    D.      Bibliography.

•     “Revving up for Relief: Harley-Davidson at the ITC”, Kennedy School of Government, Harvard University, Case C16-86-779.0 (Parts A and B)

•     International pressures in an auction market:  In-class exercise for tobacco.
•     Harley-Davidson, Inc.

Contact information:

Patrick Conway
Economics Department
Gardner Hall, CB 3305
University of North Carolina
Chapel Hill, NC 27599-3305
Phone: 919-966-5376
Fax: 919-966-4986