Yesterday, the Atlantic’s Richard Florida had a post titled “Which Countries Pay Blue Collar Workers the Most?” It featured this BLS table:

What does this table mean? Florida writes:

A quick look at the table above suggests that the level of compensation provided to manufacturing workers reflects a nation’s overall level of economic, social, and human development. And that is indeed the case, according to a simple statistical analysis by my colleague Charlotta Mellander.

Manufacturing compensation is closely related to productivity (measured as economic output per capita), global economic competitiveness and overall human development as well as my own Global Creativity Index. This is all in line with basic economics. And manufacturing compensation and wages are higher in nations with higher levels of education and where greater shares of the workforce are employed in knowledge, professional and creative jobs. In other words, manufacturing compensation and wages rise as nations become more post-industrial. Higher manufacturing compensation is also related to lower levels of inequality and higher levels of happiness.

Manufacturing workers are paid the best in the most advanced nations, places that boast advanced safety nets, generous benefit systems and high productivity. Post-industrial economies might not have the most manufacturing jobs, but their workers are the best paid. Instead of adopting a low-road strategy of trying to reduce manufacturing costs and wages in order to compete with China or other emerging economies, the U.S. would be better off with a high-road one, promoting policies that improve innovation, skills and productivity.

I think that we learn a lot about cross-country wage comparisons by thinking about what this table does not mean.

Does this table rank countries by the welfare of their blue-collar workers? No. Welfare depends on real consumer wages, not nominal wages, so a welfare comparison would necessitate deflating these nominal wages by local prices. For example, Switzerland is a notoriously expensive place to live; its price level is about 1.5 times that of the US. Those interpreting the table as saying that a US-to-Switzerland migration would raise their wages by 50% would be disappointed when they discovered the accompanying 50% price increase. So this table isn’t about workers’ welfare.

Does this table rank countries by their manufacturing TFP? No, for many (potential) reasons. For example, worker quality may differ considerably across countries. Suppose that all these countries are producing the same goods using the same technology, but different countries’ workers embody different numbers of efficiency units of labor. You’ll then observe substantial wage variation even if the unit cost of labor and manufacturing TFP are identical across countries.

Does this table rank countries by their labor productivity in manufacturing? It would if you believe we’re in a world of factor price equalization so that differences in wage rates must reflect differences in workers’ labor productivity. But are these workers making the same product using the same technology? Are enough factors of production sufficiently mobile to put us in the FPE set? Can large trade costs support differences in unit costs? And so forth.

[By the way, manufacturing employees aren't all "blue-collar workers". There is cross-country variation in the white-collar-blue-collar ratio of manufacturing, which will move the average hourly compensation measure.]

The BLS measure “hourly compensation costs in manufacturing” is a straightforward number, but cross-country wage comparisons are not a straightforward economic concept. Richard Florida suggests that we understand something about it by looking at its correlates. I would suggest that teaching students what this table does not mean may convey even more economic lessons.

I’ll be attending; please do say hello if you spot me. It was a pleasure to meet a couple of Trade Diversion readers last year in Denver.

The AEA meetings are a massive affair; if you search the program, you’ll find 17 sessions on international trade (JEL code F1) occupying a mere nine time slots. You might also catch me at sessions on F3, F4, P5, or R1. But listing all those would make this post far too long. See you in Chicago!

• Jan 06, 2012 10:15 am, Hyatt Regency, Regency D
  New Directions in Trade Policy (F1)
• Jan 06, 2012 10:15 am, Hyatt Regency, Columbian
  Offshoring Theories and Evidence (F1)
• Jan 06, 2012 10:15 am, Hyatt Regency, Regency D
  New Directions in Trade Policy (F1)
• Jan 06, 2012 12:30 pm, Hyatt Regency, Stetson Suite FG
  International Trade and Finance (F1)
• Jan 06, 2012 2:30 pm, Hyatt Regency, Stetson Suite FG
  Round Table on Trade and Development (F1)
• Jan 07, 2012 8:00 am, Hyatt Regency, Columbus CD
  Correct Measurement of International Financial and Trade Flows (F1)
• Jan 07, 2012 8:00 am, Hyatt Regency, Crystal A
  Trade and Labor Markets: Evidence from Matched Employer-Employee Data (F1)
• Jan 07, 2012 10:15 am, Hyatt Regency, Field
  Intermediation and Transport Costs in International Trade (F1)
• Jan 07, 2012 2:30 pm, Hyatt Regency, Toronto
  Estimating Trade Elasticities (F1)
• Jan 07, 2012 2:30 pm, Hyatt Regency, Columbus G
  International Trade (F1)
• Jan 07, 2012 2:30 pm, Hyatt Regency, Water Tower
  International Trade and Trade Policy: In Memory of Robert E. Baldwin (F1)
• Jan 07, 2012 2:30 pm, Hyatt Regency, Regency C
  New Directions in Trade and Geography (F1)
• Jan 08, 2012 8:00 am, Hyatt Regency, Dusable
  Advances in International Trade (F1)
• Jan 08, 2012 10:15 am, Hyatt Regency, Regency C
  International Trade Agreements (F1)
• Jan 08, 2012 10:15 am, Hyatt Regency, Columbus H
  Multi-Product Firms and Product Quality in International Trade (F1)
• Jan 08, 2012 1:00 pm, Hyatt Regency, Grand Suite 5
  Global Production Chains (F1)
• Jan 08, 2012 1:00 pm, Hyatt Regency, Gold Coast
  Labor Market Impacts of Trade (F1)

• RT @normative How Trade Policy Cost The X-Men Their Humanity http://www.slate.com/blogs/moneybox/2011/12/29/are_mutants_human.html
• No Surprises and No Momentum out of WTO Meeting — Kimberly Elliott |http://blogs.cgdev.org/globaldevelopment/2011/12/no-surprises-and-no-momentum-out-of-wto-meeting.php via @CGDev
• Norway slashes its $4.28 per kilo specific tariff in effort to alleviate massive butter shortage http://www.irishtimes.com/newspaper/world/2011/1220/1224309294257.html

You can follow @TradeDiversion on Twitter or see the tweets in the column on the right of the blog’s frontpage, www.tradediversion.net.

the US Court of Appeals for the Federal Circuit (CAFC) affirmed a decision from the lower US Court of International Trade (CIT) that the Commerce Department’s current method of applying countervailing and anti-dumping duties on imports from China and other “non-market economies” (NMEs) like Vietnam was invalid because it led to “double counting.” I’ve previously commented on the CIT decision – GPX Int’l Tire Corp. v. United States – and it was a pretty big deal. But it was somewhat limited because it applied to only Commerce’s methodology for applying anti-dumping and countervailing duties simultaneously on the same NME-origin product.

The CAFC, on the other hand, went a whole lot further than the CIT, finding that, under current US law, “government payments cannot be characterized as ‘subsidies’ in a non-market economy context, and thus that countervailing duty law does not apply to NME countries.” So instead of ruling on the discrete “double counting” issue, the CAFC essentially said that the entire CVD law doesn’t apply to Chinese and other NME imports.

That’s an even bigger deal.

His long post has details.

Although international migration can yield large benefits to individual migrants from poor countries, the net impact of migration on the source countries is unclear… In my job market paper, I add to the literature by focusing on migrants from an extremely poor country – Ethiopia – who are randomly assigned the possibility of migration through the United States’ Diversity Visa lottery. My analysis is based on a specially designed survey (which I conducted) of households of previous DV lottery winners and lottery participants in Addis Ababa…

I was able to get only a complete listing of lottery winners… It is not possible to obtain a comparable list of DV lottery applicants from which to identify lottery losers. Fortunately… around 50% of Addis’ households are conservatively estimated to have played the lottery at one time or another, thus allowing me to draw a representative sample of the control group from the city…

The study finds that having a family member win the lottery and migrate has significant positive effects on several dimensions of the remaining family’s standard of living. Families of DV migrants spend about 30% more on food, are thus better fed and have higher body mass indexes. Moreover, families of winners possess more and better quality consumer durables, which include personal computers, modern cooking stoves, household furniture and home entertainment appliances. Having a family member who won the DV lottery also gives families access to improved sources of drinking water and sanitation facilities. Winners’ families, however, have about the same savings and physical capital accumulation as other families. Most of the positive effects of emigration appear to be on the consumption side of the family budget…

A final interesting conclusion is that participants in the DV lottery (both winners and losers) have substantially higher outcomes than non-participants, suggesting that Ethiopian DV migrants are indeed positively selected. Non-participants have lower food spending, lower variety and value of durables they own, and less access to clean drinking water and convenient sanitation facilities. They are also the least likely to use banking facilities and save. Interestingly, however, lottery non-participants spend more on leisure activities.

Wow, that bears repeating: “Around 50% of Addis’ households are conservatively estimated to have played the [US green card] lottery.”

Here’s a tidbit that caught my eye:

Bernard Hoekman, director of the World Bank’s international trade department, told a seminar in Washington last week that the bank and others had overhyped the round. When it came to sharing blame, he said, “I can point to myself and my organisation.” The bank produced ambitious estimates of how Doha could boost economic growth and reduce poverty. “Those became a focal point for expectations, and expectations were overblown.”

• On why it’s called the DDA: “I was facing down a half-dozen trade ministers who said, ‘I stood in my parliament and said there’d be no new trade round.’ So I said, ‘it’s not a trade round; it’s a development agenda’. [:::pffffffttt:::] It’s the sort of thing that doesn’t show up in many textbooks that gets the process going.” – Mike Moore
• On Doha’s prospects: “I must say, I have never heard Pascal Lamy more grim than this evening.” – Merit Janow
• “If Doha goes, no one is ever going have a multilateral round again.” – Jagdish Bhagwati

[My transcriptions are closer to quotations than paraphrasing, but these are not verbatim.]

Also on Doha, don’t miss this Alan Beattie tweet.

Blueseed plans to buy a ship and turn it into a floating incubator anchored in international waters off the coast of California…

Immigration law makes it difficult for many would-be immigrants to get permission to work in the United States. For example, there’s an annual cap on the number of H1-B visas available for American employers to hire skilled immigrant workers. However, permission to travel to the United States for business or tourism is much easier to get.

Marty pointed to the B-1 business visa as a key part of his company’s strategy. With a B-1 visa, visitors can freely travel to the United States for meetings, conferences, and even training seminars. B-1 visas are relatively easy to get, and can be valid for as long as 10 years.
Blueseed plans to provide regular ferry service between the ship to the United States. While Blueseed residents would need to do their actual work—such as writing code—on the ship, Marty envisions them making regular trips to Silicon Valley to meet with clients, investors, and business partners…

Blueseed’s business model seems like a long shot. Buying, outfitting, staffing, and filling a 1,000-person ship seems like a tall order for even the most talented three-person team.

• Nikolas J Zolas (UC Davis): “Firm Locational Patenting Decisions“
• Nan Zhang (Virginia): “Productivity and Labor Market Effects of Offshoring to Low-Wage Countries“
• Yiqing Xie (Boulder): “Exporting, Licensing, FDI and Productivity Choice: Theory and Evidence from Chilean Data“
• Anna Wong (Chicago): “Measuring Trade Barriers: An Application to China’s Domestic Trade“
• Tao Wang (Princeton): “Kyoto Protocol and the Patterns of International Trade“
• Mehmet Fatih Ulu (Chicago): “Heterogeneity and Uncertainty in Firm Selection into Foreign Markets“
• Martin Tobal (UCSD): “A Model Of Employment And Wage Impacts Of Service Offshoring“
• Olga Timoshenko (Yale): “Product Switching in a Model of Learning“
• Lucas Threinen (Chicago): “The Dynamic Response to Trade Policy“
• Michael J. Sposi (Iowa): “Evolving Comparative Advantage, Structural Change, and the Composition of Trade“
• Adam Storeygard (Brown): “Farther on down the road: Transport costs, trade and urban growth in sub-Saharan Africa“
• Wei Shi (UCLA): “A model of the technology adoption decision for heterogeneous firms“
• Huimin Shi (Ohio State): “Gravity or Distorted Gravity: Evidence from Chinese Data“
• Liugang Sheng (UC Davis): “ The Ownership Structure of Offshoring and Wage Inequality: Theory and Evidence from China“
• Gisela Rua (Berkeley): “Fixed Costs, Network Effects, and the International Diffusion of Containerization
• Dorothée Rouzet (Harvard): “ Improving “National Brands”: Reputation for Quality and Export Promotion Policies“
• Gina Pieters (Minnesota): “Trade and Within-Country Consumption Inequality“
• Megha Mukim (LSE): “Does exporting increase productivity? Evidence from India“
• Madhura Maitra (Columbia): “Unexceptional Exporter Performance in China? Role of Processing Trade“
• April Xiangjun Ma (Virginia): “Do Taxes Influence the Organizational Boundaries of International Firms? An Income-Shifting Channel through Transfer Pricing“
• Gary Lyn (PSU): “Marshallian Externalities, Comparative Advantage and International Trade“
• William Lincoln (Michigan): “Entry Costs and Increasing Trade“
• Donghyun (Don) Lee (Oregon): “Cross-Border Mergers and Acquisitions with Heterogeneous Firms: Technology vs. Market Motives“
• Paul Landefeld (Virginia): “Task Trade, Wages, and Transportation Costs“
• Illenin O. Kondo (Minnesota): “Trade Reforms, Foreign Competition, and Labor Market Adjustments in the U.S.“
• Nune Hovhannisyan (Boulder): “Technology Gap and International Knowledge Transfer: New Evidence from the Operations of Multinational Corporations“
• David Hémous (Harvard):”Environmental Policy and Directed Technical Change in a Global Economy: Is There a Case for Carbon Tariffs?“
• Rachita Gullapalli (Berkeley): “Does Foreign Portfolio Investment Help In Bad Times? Firm-Level Evidence from the Asian Financial Crisis“
• Daniel Gomez Gaviria (Chicago Booth): “Mergers and Heterogeneous Firms: Trade, asset reallocation and productivity “
• Teresa Fort (Maryland): “Breaking up is hard to do: Why firms fragment production across locations“
• Michael Fabinger (Harvard): “Trade and Interdependence in a Spatially Complex World“
• David DeRemer (Columbia): “The Evolution of International Subsidy Rules“
• F. Banu Demir (Oxford): “Trading Tasks and Quality“
• Hyo-Youn Chu (Boston U): “ Investments in Response to Trade Policy: The Case of Japanese Firms during Voluntary Export Restraints“
• Moonjung Choi (Virginia): “ Export Prices and Relative Location of Exporting Countries“
• Kristy Buzard (UCSD): “Trade Agreements, Lobbying and Separation of Powers“
• Wyatt Brooks (Minnesota): “Credit Market Frictions and Trade Liberalization“
• Cagatay Bircan (Michigan): “Optimal Degree of Foreign Ownership Under Uncertainty“
• Treb Allen (Yale): “Information Frictions and Trade“