International trade, multinational corporations, and American wages

Several economists, politicians, and pundits have recently argued that in the 1980's the American economy became more tightly integrated into the world economy. In particular, they often argue that American labor-market trends have been increasingly driven by this "internationalization" of the economy. Inspired by these arguments, this thesis investigates whether international trade and multinational corporations influenced trends in the American labor market during two periods: the 1980's and the antebellum years. In the 1980's, average real wages grew very sluggishly and the wages of skilled workers grew very sharply relative to those of less-skilled workers. I find that neither international trade through the Stolper-Samuelson process nor outsourcing by multinationals contributed significantly to either of these developments. In antebellum America, the construction of canals and railroads equalized commodity prices between the Northeast and the Midwest. However, I find that because regional production patterns were specialized, this commodity-price equalization across regions did not lead to wage equalization across regions. Thus, the overall finding of the thesis is that in two labor- market episodes where strong prima facie evidence pointed to a role for either trade or multinationals, this evidence was not supported by more rigorous empirical analysis. The overall policy implication is that current policies designed to ameliorate the labor-market effects of the "internationalization" of the American economy may be unnecessary. (Copies available exclusively from MIT Libraries, Rm. 14-0551, Cambridge, MA 02139-4307. Ph. 617-253-5668; Fax 617-253-1690.)