International Trade and Investment.

• Position: Program and Working Group Meeting

The NBER's International Trade and Investment Program met at the NBER's office in California on December 1-2, 2006. Program Director Robert C. Feenstra, University of California, Davis, organized the meeting. These papers were discussed:

"Trading Tasks: A Simple Theory of Offshoring"--Gene M. Grossman and Esteban Rossi-Hansberg, Princeton University and NBER

"Trade, Diffusion, and the Gains from Openness"--Andres Rodriguez-Clare, Pennsylvania State University and NBER

"Multi-Product Firms and Trade Liberalization"--Andrew B. Bernard, Dartmouth College and NBER; Stephen J. Redding, London School of Economics; and Peter K. Schott, Yale University and NBER

"Quality Pricing and Endogenous Entry: A Model of Exchange Rate Pass-Through"--Raphael Auer, Swiss National Bank, and Thomas Chaney, University of Chicago and NBER

"Explaining Import Variety and Quality: The Role of the Income Distribution"--Yo Chul Choi and Chong Xiang, Purdue University, and David Hummels, Purdue University and NBER

"Trade Adjustment and Human Capital Investments: Evidence from Indian Tariff Reform"--Eric Edmonds and Nina Pavcnik, Dartmouth College and NBER, and Petia Topalova, International Monetary Fund

"Trade, Knowledge, and the Industrial Revolution"--Kevin H. O'Rourke, Trinity College, Dublin and NBER; Ahmed S. Rahman, United States Naval Academy; and Alan M. Taylor, University of California, Davis and NBER

"Buffalo Hunt: International Trade and the Virtual Extinction of the North American Bison"--M. Scott Taylor, University of Calgary and NBER

For centuries, most international trade involved an exchange of complete goods. But, with recent improvements in transportation and communications technology, it increasingly entails different countries adding value to global supply chains, or what might be called "trade in tasks." Grossman and Rossi-Hansberg propose a new conceptualization of the global production process that focuses on tradable tasks and use it to study how falling costs of offshoring affect factor prices in the source country. The authors identify a productivity effect of task trade that benefits the factor whose tasks are more easily moved offshore. In the light of this effect, reductions in the cost of trading tasks can generate shared gains for all domestic factors, in contrast to the distributional conflict that typically results from reductions in the cost of trading goods.

Rodriguez-Clare presents and then calibrates a model in which countries...