Ignoring strategic interactions among final goods producers, the extant theoretical literature shows that lower costs of imported inputs increase the exports of the final goods using those inputs. Hence, it does not explain the empirically relevant positive relationship between the costs of...

I use Feenstra and Hanson's (2003) outsource-driven framework to investigate the effect of imports in intermediate inputs on the demand for skilled and unskilled labor in Australia. Using a panel data on six two-digit manufacturing industries over the period from 1986/87 to 1994/95, the results...

This paper analyzes how access to imported inputs affects firms in developing countries, where domestically produced high-quality inputs are relatively costly. We build an O-Ring type model with quality complementarity across input tasks, ranking tasks by their quality sensitivity. Because...

The rise in income inequality in developing countries after trade liberalization has been a puzzle for trade theory, which predicts the opposite effect. The authors present a model with imported intermediate goods in which the relative wages of skilled labor can rise due to higher imports of...