The Journal of International Economics is intended to serve as the primary

outlet for theoretical and empirical research in all areas of international

economics. These include, but are not limited to the following: trade
patterns, commercial policy; international institutions; exchange rates; open
economy macroeconomics; international finance; international factor
mobility. The Journal especially encourages the submission of articles which
are empirical in nature, or deal with issues of open economy
macroeconomics and international finance.

Theoretical work submitted to the Journal should be original in its motivation

or modelling structure. Empirical analysis should be based on a theoretical
framework, and should be capable of replication. It is expected that all
materials required for replication (including computer programs and data
sets) should be available upon request to the authors.

The effects of offshoring on the elasticity of labor demand

, a,
Mine Zeynep Senses
a
Johns Hopkins University, SAIS, 1717 Massachusetts Avenue NW, Washington, DC 20036, United States
Received 23 May 2007;
revised 14 February 2010;
accepted 15 February 2010.
Available online 20 February 2010.

Abstract
In this paper, I use detailed plant-level data to analyze the relationship between offshoring and labor demand elasticities in the U.S.
manufacturing sector during the 1972–2001 period. The results suggest that conditional demand elasticities for production workers
are positively associated with increased exposure to offshoring both in the short-run and in the long-run. This relationship holds both
for the unbalanced panel of plants and, for plants which continue their operations throughout the sample period. Controlling for skill
biased technical change does not alter the magnitude or the significance of the estimated positive relationship between offshoring
and labor demand elasticities.

Market im
perfections, wealth inequality, and the distribution of trade gains
 Reto Foellmia, ,
and Manuel Oechslinb, 1,
a
Department of Economics, Schanzeneckstrasse 1, CH-3001 Bern, University of Bern, Switzerland
b
Department of Economics, PO Box 90153, 5000 LE Tilburg, Tilburg University, The Netherlands
Received 11 September 2008;
revised 4 March 2010;
accepted 6 March 2010.
Available online 16 March 2010.

Abstract
Globalization increasingly involves less-developed countries (LDCs), i.e., economies which usually suffer from severe imperfections
in their financial systems. Taking these imperfections seriously, we analyze how credit frictions affect the distributive impact of trade
liberalizations. We find that free trade significantly widens income differences among firm owners in LDCs: While wealthy
entrepreneurs are better off, relatively poor business people lose. Intuitively, with integrated markets, profit margins shrink — which
makes access to credit particularly difficult for the least-affluent agents. Richer entrepreneurs, by contrast, win because they can
take advantage of new export opportunities. Our findings resonate well with a number of empirical regularities, in particular with the
observation that some liberalizing LDCs have observed a surge in top-income shares.

Keywords: Wealth inequality; Trade liberalization; Credit market frictions; Top incomes

The role of multinational production in a risky environment

Natalia Ramondoa, and Veronica Rappoportb, ,

a
University of Texas-Austin, United States
b
Columbia Business School, United States
Received 28 April 2009;
revised 23 February 2010;
accepted 23 February 2010.
Available online 1 March 2010.

Abstract
This paper explores the aggregate consequences of Foreign Direct Investment (FDI) on the opportunities for risk diversification
available to consumers. The crucial difference between FDI and other international financial flows is that the former involves
technology flows across countries. We present a model where firm-embedded productivity can be transferred costly across
countries through the activity of multinational firms. We find that risk patterns affect multinationals' location decisions and, in turn,
these decisions change the scope for international risk diversification even in a world with complete financial markets.
Keywords: Foreign Direct Investment; Multinational firms; International risk sharing

JEL classification codes: F41; F23