Transcript Foreign Direct Investment and Commitment Problems in Regional

Services Offshoring and the
Political Responses of Labor:
The Case of Motion Pictures
Kerry A. Chase
Context: Offshoring and Anxiety
Political Economy of Offshoring
Economic
What is the impact on
wages and inequality?
Political
What are the incentives
for protectionist responses?
Literature: Missing Pieces
Wage and employment effects of trade in
services have received little attention
Divisions among classes of labor neglected
in the domestic politics of trade
Offshoring remains an understudied issue
Hypotheses on Offshoring
Distributional effects
H1:
The distribution of wages will
become less equal
Political responses
H2:
Low-skilled labor will be more
favorable to trade protection
Why Motion Picture Services?
• Important to US economy → employs
more than apparel, steel, etc.
• Offshore imports more than double in
1996-2001 → examine impact
• Labor reacts → can observe political
divisions in organized activity
Data and Methods
• Occupational Employment Statistics
• Panel survey of wages by occupation
and industry
• Analyze trends in wage inequality:
compute Theil index; bootstrap test
of changes across years DT = T2-T1
Theil Index of Wage Inequality for
Motion Picture Services
Year
Theil Index
2001
0.104
2000
0.105
1999
0.089
1998
0.077
1997
0.085
Political Responses
• Film and Television Action Committee
petitions for countervailing duties; plans
Section 301 case vs. Canada
• Occupations supporting FTAC coded 2,
otherwise 1 (no position) or 0 (oppose)
Ordered Probit for FTAC Support
EDUCATION
-0.029***
-0.280***
TRAINING
-0.050***
SKILL
Premium
-2.068**
-1.680*
-1.702*
(Other controls)
Model 2
Pseudo r-squared
N=
31.53***
0.230
121
29.95***
0.218
121
33.76***
0.247
120
Implications for Other Services
• Organized response may be easier in
geographically concentrated services
• Foreign inducements encourage labor
groups to seek trade remedies
• Unfilled demand for Trade Adjustment
Assistance (TAA) in services
Conclusions
• Standard trade theories nicely explain
distributional effects of offshoring
• High-skilled workers apparently not at
risk, despite popular perceptions
• Skill is the critical dividing factor in
lobbying against offshoring
Supporting Slides
U.S. Imports of Motion Picture
Goods, 1996-2004
350
300
Value in $ million
250
200
All imports
Imports from Canada
Imports from other countries
150
100
50
0
1996
1997
1998
1999
2000
Year
2001
2002
2003
2004
Measures of “Skill”
Education
% with college degree
Training
Level of training
required for occupation
Skill
Importance of “complex
problem solving skills”
Marginal Effect of Skill Measures
on Probability of FTAC Support
Change in variable from
low to high
Change in probability of
FTAC support
EDUCATION
-0.337
TRAINING
-0.337
SKILL
-0.376
TAA Petitions in Services
350
100%
90%
300
80%
70%
60%
200
50%
150
40%
30%
100
20%
50
10%
0
0%
1997
1998
1999
2000
2001
2002
Year
2003
2004
2005
2006
Percent certified
Number of petitions
250
Number of petitions
Percent certified