S-60Solutions ■Chapter 7 Foreign Offshoring of Goods and Services
Answer: There are many ways to solve the last two equations for the change inthe wages (?WH/ WH), and (?WL/ WL). One method is to eliminate the termfor the percentage change of the high-skilled wage; this can be done by multi-plying the ?rst equation by 4 and subtracting the second equation from it, to get:
?WH?20% ??WH??
????????
?WL40
???WL100
?WL40
???WL100
??????
160
?, for components100
10
?, for R&D100
?WH?Minus: 0 ?
WH?WLEquals: ?20% ?0 ??WL????
150
?, answer100
It follows that (?WL/ WL) ??20% ?(100 / 150) ??13.3%, so that the wagefor low-skilled labor falls by 13.3% when the price of components falls by 10%.To ?nd the change in the high-skilled wage, we can take this solution, and plugit back into the equation for the change in wages in R&D, to get:
?WH?0 ?
WH????
4010??13.3%?,100100
??
so it follows that (?WH/ WH) ?13.3% ?(10 / 40) ?3.3%. The wage for high-skilled labor increases by 3.3% when the price of components falls by 10%.c.What has happened to the relative wageof high-skilled/low-skilled labor? Does
this match the predictions of the offshoring model in this chapter?
Answer: With the wage for high-skilled labor going up, and the wage for low-skilled labor going down, it follows that the relative wage of high-skilled labor(WH/ WL) also rises. Equivalently, the relative wage of low-skilled labor, whichis (WL/ WH), falls. This is as predicted by our model in this chapter, where a fallin the relative price of components or a rise in the relative price of R&D bene-?ts high-skilled labor.
5.Consider the model of a ?rm that produces ?nal goods using R&D and components
as inputs, with cost data as follows:
Components:Total costs of production ?PC?QC?100
Earnings of high-skilled labor ?WH?HC?25Earnings of low-skilled labor ?WL?LC?25Earnings of capital ?R?KC?50
Share of total costs paid to high-skilled labor ?20 / 100 ?25%Share of total costs paid to low-skilled labor ?25 / 100 ?25%
R&D:
Total costs of R&D ?PR?QR?100Earnings of high-skilled labor ?WH?HR?30Earnings of low-skilled labor ?WL?LR?20Earnings of capital ?R?KR?50
Share of total costs paid to high-skilled labor ?30 / 100 ?30%Share of total costs paid to low-skilled labor ?20 / 100 ?20%
Solutions ■Chapter 7 Foreign Offshoring of Goods and ServicesS-61
a.Which factor(s) is components intensive? Which factor(s) is research intensive?
Answer: Component production is intensive in the use of low-skilled labor, be-cause the cost share of low-skilled labor in components (25%) exceeds the costshare of low-skilled labor in R&D (20%). Similarly, R&D is intensive in the useof high-skilled labor, because the cost share of high-skilled labor in R&D (30%)exceeds the cost share of high-skilled labor in components (25%). Notice thatcapital is used equally in both activities, so it is not intensive in either one.b.Suppose that due to the opening of trade, the relative price of R&D in-creases, ?PR/ PR?10%, whereas the price of components stays unchanged, ?PC/ PC?0. Calculate the change in the relative wage of high-skilled andlow-skilled labor.
Answer: Following the same hint that was given for problem 4, we end up withthe following two equations:
?WH0 ??WH?????
?WL25
???WL100
?WL30
???WL100
???
25
?, for components100
20
?, for R&D.100
?WH10% ??WH????????
Multiplying the components equation by 4 and the R&D equation by 5, andsubtracting them, we get:
?WH0 ??WH????????????
?WL100
???WL100
??????
100
?, for components100
?WHMinus: 50% ??WH?
?WL150
???100WL100
?, for R&D100
?WH?Equals: ?50% ??
WH?
50
??0, answer100
It follows that (?WH/ WH) ?50% ?(100 / 50) ??100%, so that the wage forhigh-skilled labor rises by 100% when the price of R&D rises by 10%. To ?ndthe change in the low-skilled wage, we can take this solution and plug it backinto the equation for the change in wages in components, to get:
?WL25
??0 ?100%?
WL100
??????
25
?,100
so it follows that (?WL/ WL) ??100%. The wage for low-skilled labor fallsby 100% when the price of R&D rises by 10%.
c.What has happened to the relative wageof high-skilled/low-skilled labor? How does
this result compare with problem 4, and explain why it is similar or different.
Answer: With the wage for high-skilled labor going up, and the wage for low-skilled labor going down, it follows that the relative wage of high-skilled labor(WH/ WL) also rises. Equivalently, the relative wage of low-skilled labor, whichis (WL/ WH),falls. The change in the relative wages is the same as what we foundin problem 4, because a fall in the relative price of components or a rise in therelative price of R&D has the same effects: to bene?t high-skilled labor. Wagechanges found in this problem are larger because the cost shares in the two ac-tivities are more similar than those in problem 4.
S-62Solutions ■Chapter 7 Foreign Offshoring of Goods and Services
6.The diagram below shows what happened to the relative wage and relative demand
for high-skilled labor in the U.S. manufacturing sector during the 1990s. Thesepoints are plotted using the data from Figures 7-5 and 7-6.
1.801.781.76Nonproduction/Production Wage1.741.721.701.68
19941.661.641.621.60
0.2
0.25
0.3
0.35
0.4
0.45
0.5
0.55
0.6
19931991199219901998200020011999199719961995Nonproduction/Production Labor
a.What must have happened to the demand and supply curves to explain this
change in relative wage and relative employment?
Answer: The relative nonproduction wage increased signi?cantly in U.S. man-ufacturing between 1990 and 2001 but the relative employment of nonproduc-tion labor did not change much. This pattern is consistent with an outward shiftin relative demand and an inward shift in relative supply for nonproductionworkers. As such, relative demand for high-skilled labor has increased (shiftedright) and the relative supply of high-skilled labor has decreased (shifted left). Seethe ?gure on the next page.
b.Why do you think the demand and supply curves shifted this way? (Hint:Think
about where the workers who leave manufacturing might be going.)
Answer: The increase in relative demand is a continuation of what we alreadysaw in the 1980s, due to high-skilled-biased technologic change and offshoring.The reduction in relative supply is new, however. One explanation for this is thathigh-skilled workers were pulled out of manufacturing and into services (becausemany high-skill-intensive service sectors have been expanding).
Solutions ■Chapter 7 Foreign Offshoring of Goods and ServicesS-63
1.801.781.76Nonproduction/Production Wage1.741.721.701.68
19941.661.641.621.60
0.2
0.25
0.3
0.35
0.4
0.451993199119991998200020011997Supply, 2001Supply, 19901996199519921990Demand, 2001Demand, 19900.50.550.6
Nonproduction/Production Labor
7.Read the article about offshoring by General Motors located online at:
http://www.businessweek.com/technology/content/feb2006/tc20060202_578175.htmand answer:
a.What goods or services are being offshored by GM?
Answer: GM is offshoring its information technology (IT) services (this articleis not talking about the offshoring of manufacturing).
b.What company was named a “tier-one” supplier by GM? What do you already
know about this company from Side Bar: Offshoring Microsoft Windowsin this chapter?
Answer: The Indian company Wipro was named a tier-one supplier to GM.Wipro already manages Microsoft’s computer resources during Seattle’s eveninghours, as described in a Side Bar in this chapter.
c.Why do you think that GM was willing to spend this money on offshoring?
Answer: GM’s decision may re?ect the decreasing costs to high-tech offshoring(relative to the costs of doing the same functions “in-house”) due to increasedinternational competition from countries such as India. Even though GM is los-ing money right now, it still makes sense to offshore IT services if these can bedone cheaper abroad. By doing so, GM will save money and hopefully restoreits pro?tability.
8.Read the following excerpt, and using what you have learned in this chapter, discuss
how offshoring creates opportunities for the countries involved.
Source: Excerpted from Steven Pearlstein, “Still Short of the Offshoring Ideal,” The Wash-ington Post,March 12, 2004.
Sudhakar Shenoy, chief executive of Information Management Consultants in Reston, makes an ef-fective pitch for “offshoring.”
Several years ago IMC saw a market developing for software that would allow biotech companies tomake better and faster use of the new human genome research. Doing it here, Shenoy calculated, would
S-64Solutions ■Chapter 7 Foreign Offshoring of Goods and Services
cost several million dollars, which he ?gured would have priced the product too high for most customers.But by having a small group of engineers at IMC’s Indian subsidiary do much of the coding work, hewas able to bring the project in at $500,000. The result: IMC now has a thriving line of business inbioinformatics, with major clients and a growing payroll of six-?gure PhDs here. And there are moreengineers than ever—six here for every one in India.
But that’s only part of the good-news story. In Pune, where IMC’s Indian operations are located,an airport under construction will require lots of U.S. engineering, design and electronics. At the sametime, IMC’s Indian engineers, who earned annual salaries of $3,500 a decade ago, now command upto $12,000—enough to buy all manner of imported consumer goods.
Answer: By offshoring software in India, IMC is able to pass the cost savings tobiotech companies researching the human genome. Moreover, the derived de-mand from Indian engineers by successful companies like IMC attributes tohigher salaries for the local talents. In addition, the need for reliable infrastruc-ture resulting from a growing economy boosted by companies such as IMC hasled to the demand for U.S. engineering, design, and electronics.
9.The quote from the 2004 Economic Report of the Presidentat the beginning of the
chapter generated a lot of controversy that year, as discussed at the beginning of sec-tion 3 in the chapter. The chairman of the Council, N. Gregory Mankiw, made thefollowing additional comments in a speech while presenting the report: “Outsourc-ing is just a new way of doing international trade. More things are tradable than weretradable in the past, and that’s a good thing.”
Those statements quickly led to reactions from both Democratic and Republicanmembers of Congress. Tom Daschle, a Democrat and the Senate minority leader,said, “If this is the administration’s position, they owe an apology to every worker inAmerica.” Dennis Hastert, a Republican and speaker of the House, said, “Outsourc-ing can be a problem for American workers and the American economy.” JohnKerry, the Democratic presidential candidate, referred to businesses that offshored as“. . . Benedict Arnold corporations.” In response, Mankiw clari?ed his earlier com-ments: “My lack of clarity left the wrong impression that I praised the loss of U.S.jobs.”
Although you might believe that these statements are just a squabble betweenpoliticians trying to score points during the presidential campaign, it is still worth try-ing to sort out who gains and who loses from offshoring.
a.Why does Mankiw say that “outsourcing [is] . . . a good thing”? Who is it good
for in the United States? Are there overall gains for the United States? Explainwith a diagram.
Answer: Mankiw says that offshoring is “a good thing” because there are over-all gains from the trade of production activities relative to autarky. As seen inFigure 7-10, both countries bene?t by specializing in certain production activi-ties and offshoring others. Trade in production activities allows for higher levelsof output employing the same amount of domestic inputs. However, within eachcountry these gains may not be spread evenly across workers of different skill lev-els, as changes in the number of tasks offshored lead to changes in the relativewage of high-skilled workers.
b.Later in this chapter, Paul Samuelson is quoted as saying that there is no “neces-sarysurplus of winning over losings” due to offshoring. Use Figure 7-12 to care-fully explain why Samuelson says this.
Answer: Samuelson points out that loss due to offshoring may occur as a resultof the deterioration in a country’s terms of trade. That is, from one offshoringequilibrium to another there are not necessarily gains since an increase in the rel-ative price of a production activity hurts the importer of that activity. Of note,
国际贸易》芬斯特拉版人大版练习题答案
