Gene M Grossman

Gene M Grossman
Princeton University | PU

About

191
Publications
47,226
Reads
How we measure 'reads'
A 'read' is counted each time someone views a publication summary (such as the title, abstract, and list of authors), clicks on a figure, or views or downloads the full-text. Learn more
48,203
Citations

Publications

Publications (191)
Article
A vast literature seeks to measure and explain the apparent decline in the labor share in national income that has occurred in recent times in the United States and elsewhere. The culprits include technological change, increased globalization and the rise of China, the enhanced exercise of market power by large firms in concentrated product markets...
Article
We study the determinants of factor shares in a neoclassical environment with capital-skill complementarity and endogenous education. In this environment estimates of the elasticity of substitution between capital and labor that fail to account for human capital levels will be biased upward. We develop a model with overlapping generations, technolo...
Article
What incentives do governments have to negotiate trade agreements that constrain their domestic regulatory policies? We study a model in which firms design products to appeal to local consumer tastes, but their fixed costs increase with the difference between versions of their product destined for different markets. In this setting, firms' profit‐m...
Article
We characterize trade policies that result from political competition when assessments of well-being include both material and psychosocial components. The material component reflects, as usual, satisfaction from consumption. Borrowing from social identity theory, we take the psychosocial component as combining the pride and self-esteem an individu...
Article
We introduce firm and worker heterogeneity into a model of innovation-driven endogenous growth. Individuals who differ in ability sort into either a research activity or a manufacturing sector. Research projects generate new varieties of a differentiated product. Projects differ in quality and the resulting technologies differ in productivity. In b...
Article
The evidence for the United States points to balanced growth despite falling investment good prices and a less-than-unitary elasticity of substitution between capital and labor. This is inconsistent with the Uzawa Growth Theorem. We extend Uzawa's theorem to show that the introduction of human capital accumulation in the standard way does not resol...
Article
We study the distributional consequences of trade in a world with two industries and two heterogeneous factors of production. Productivity in each production unit reflects the ability of the manager and the abilities of the workers, with complementarity between the two.We begin by examining the forces that govern the sorting of worker and manager t...
Article
In this chapter, I review the literature on governments’ motivations for negotiating and joining international trade agreements. I discuss both normative explanations for trade agreements and explanations based on political-economy concerns. Most of the chapter focuses on the purpose of multilateral agreements, but I do discuss briefly the reasons...
Article
How does globalization affect economic growth? We discuss mechanisms that link international integration to the incentives for knowledge accumulation and the efficacy of that process. First, integration facilitates the flow of knowledge across national borders. Second, integration affords innovators a larger potential market even as it subjects the...
Article
In this paper, I survey the recent theoretical literature that incorporates heterogeneous labor into models of international trade. The models with heterogeneous labor have been used to study how talent dispersion can be a source of comparative advantage, how the opening of trade affects the full distribution of wages, and how trade affects industr...
Article
Full-text available
This study is part of The American Law Institute (ALI) project Legal and Economic Principles of World Trade Law. The project aims to analyze the central instrument in the World Trade Organization (WTO) Agreement for the regulation of trade in goods – The General Agreement on Tariffs and Trade GATT). The present study is one of two background studie...
Article
Full-text available
The purpose of the study is to propose interpretations of the National Treatment (NT) provision included in Art. III GATT, unbound by case-law interpretations of this provision. To make such proposals, we need to understand the role of the provision in the agreement. To this end, we first examine in Chapter 2 the negotiating record relevant to the...
Article
Full-text available
We study patterns of foreign direct investment (FDI) in a multi-country world economy. We develop a model featuring non-homothetic preferences for quality and monopolistic competition in which specialization is purely demand-driven and the decision to serve foreign countries via exports or FDI depends on a proximity-concentration trade-off. We char...
Article
We develop a framework for studying trade in horizontally and vertically differentiated products. In our model, consumers with heterogeneous incomes and tastes purchase a homogeneous good and make a discrete choice of quality and variety of a differentiated product. The distribution of preferences generates a nested-logit demand structure such that...
Article
Does policymakers' horizon affect their willingness to support economic reforms? Voting in the U.S. Congress provides an ideal setting to address this question: differences between the House and Senate, in which members serve two-year and six-year mandates respectively, allow to examine the role of term length; the staggered structure of the Senate...
Chapter
It has been a pleasure to re-read some of Alan Deardorff's papers on trade and growth, and to read others for the first time. These papers are typical of Alan's work; they artfully tease new insights on important issues from simple, familiar models. It is fitting to begin my review with “A Geometry of Growth and Trade.” Alan loves diagrams, and giv...
Article
Full-text available
We estimate how offshoring and exporting affect wages by skill type. Our data match the population of Danish workers to the universe of private-sector Danish firms, whose trade flows are broken down by product and origin and destination countries. Our data reveal new stylized facts about offshoring activities at the firm level, and allow us to both...
Article
Full-text available
We characterize how firms select into exporting or foreign direct investment, and how many plants they choose to establish, in a group of foreign countries. We show that, if and only if firms' maximum profits are supermodular in tariffs and production costs, then: the most efficient firms establish a branch plant in each country; firms of intermedi...
Article
The Upland Cotton case raises a range of interesting issues regarding the rationale for retaliation in the WTO system and the proper approach to its calibration. These include: Should the approach to retaliation differ in cases involving prohibited or actionable subsidies? When should cross-retaliation be allowed? Should retaliation be based only o...
Article
The Upland Cotton case raises a range of interesting issues regarding the rationale for retaliation in the WTO system and the proper approach to its calibration. These include: Should the approach to retaliation differ in cases involving prohibited or actionable subsidies? When should cross-retaliation be allowed? Should retaliation be based only o...
Article
Full-text available
We develop a framework for studying trade in horizontally and vertically differentiated products. In our model, consumers with heterogeneous incomes and tastes purchase a homogeneous good and make a discrete choice of quality and variety of a differentiated product. The distribution of preferences generates a nested-logit demand structure such that...
Article
We propose a theory of task trade between countries that have similar relative factor endowments but may differ in size. Firms produce differentiated goods by performing a continuum of tasks, each of which generates local spillovers. Tasks can be performed at home or abroad, but offshoring entails costs that vary by task. In equilibrium, the tasks...
Article
We study a world with national external economies of scale at the industry level. In contrast to the standard treatment with perfect competition and two industries, we assume Bertrand competition in a continuum of industries. With Bertrand competition, each firm can internalize the externalities from production by setting a price below those set by...
Article
Full-text available
Price controls create opportunities for international arbitrage. Many have argued that such arbitrage, if tolerated, will undermine intellectual property rights and dull the incentives for investment in research-intensive industries such as pharmaceuticals. We challenge this orthodox view and show, to the contrary, that the pace of innovation often...
Article
We study budget formation in a model featuring separation of powers. In our model, the legislature designs a budget bill that can include a cap on total spending and earmarked allocations to designated public projects. Each project provides random benefits to one of many interest groups. The legislature can delegate spending decisions to an executi...
Article
We propose a theory of the global production process that focuses on tradeable tasks, and use it to study how falling costs of offshoring affect factor prices in the source country. We 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...
Article
We review the WTO Appellate Body report on United States as-such to ensure that duty orders are not extended when their removal would generate no harm to an import competing industry by failing to impose sufficient discipline on their conduct. We argue that a sunset review requires an evaluation of competitive conditions in the industry and of the...
Article
Using data on U.S. intra-firm and arm's-length imports for 5,423 products and 210 countries, we examine the determinants of the share of U.S. imports that are intra-firm. Three determinants of this share have been proposed: (1) Antràs (2003) focuses on the share of inputs provided by the headquarter firm. We provide added confirma-tion and further...
Article
Full-text available
The Appellate Body decision in the steel dispute is the latest in a line of unsatisfactory decisions in the safeguards area. The problem stems from the fact that the treaty text regarding the preconditions for the use of safeguard measures is badly deficient. The Appellate Body with its usual emphasis on textualism has done little to resolve the pu...
Article
Full-text available
We develop a simple general equilibrium model for studying the impact of workers'relative- wage concerns on resource allocation and the organization of production. We characterize equi- libria for the closed economy and for an open economy in which an intermediate input can be produced oshore. In the closed economy, …rms that are otherwise identica...
Article
This paper addresses the dispute brought to the World Trade Organization (WTO) by India concerning antidumping duties imposed by the European Communities (EC) on cotton-type bed linen. An earlier complaint brought by India challenged the antidumping duties on a number of points, including the EC practice of zeroing for the computation of dumping ma...
Article
We examine integration strategies of multinational firms that face a rich array of choices of international organization. Each firm in an industry must provide headquarter services from its home country, but can produce its intermediate inputs and conduct assembly operations in one or more of three locations. We study the equilibrium choices of fir...
Article
Introduction The WTO case brought by India in 2002 to challenge aspects of the European Communities’ Generalized System of Preferences (GSP) brings fresh scrutiny to a policy area that has received little attention in recent years - trade preferences for developing countries. The idea for such preferences emerged from the first United Nations Confe...
Chapter
Introduction Since the inception of the WTO, safeguard measures have regularly been the subject of dispute settlement proceedings. The latest in this chain of disputes concerns the definitive safeguard measures imposed by the United States on a wide range of steel products in 2002. The safeguards investigation of steel imports was initiated under t...
Chapter
This chapter addresses the dispute brought to the World Trade Organization (WTO) by India concerning anti-dumping duties imposed by the European Communities (EC) on cotton-type bed linen. An earlier complaint brought by India challenged the anti-dumping duties on a number of points, including the EC practice of “zeroing” for the computation of dump...
Article
Full-text available
We develop a novel model of campaigns, elections, and policy-making in which the ex ante objectives of national party leaders differ from the ex post objectives of elected legislators. This generates a distinction between "policy rhetoric" and "policy reality" and introduces an important role for "party discipline" in the policy-making process. We...
Article
Full-text available
We examine the strategies of …rms that face an array of organizational choices. Each …rm must acquire intermediate inputs and assemble …nal products. It can perform these activities internally or externally, and at home or abroad. We study the relative prevalence of various organizational structures in industries that dier in …xed organizational co...
Article
Full-text available
The Generalized System of Preferences (GSP), authorized by the 1979 Enabling Clause under GATT, allows importing nations to extend preferential tariff treatment to the products of developing countries. India recently brought a successful WTO complaint challenging aspects of the EC preference scheme, claiming that it impermissibly discriminated amon...
Article
We study the determinants of the location of subcontracted activity in a general equilibrium model of outsourcing and trade. We model outsourcing as an activity that requires search for a partner and relationship-specific investments that are governed by incomplete contracts. The extent of international outsourcing depends "inter alia" on the thick...
Article
In United States – Countervailing Measures Concerning Certain Products from the European Communities (WTO Doc. WT/DS212/QB/R, henceforth Certain Products), the Appellate Body (AB) of the World Trade Organization was called upon to revisit the issue of whether the United States can legally impose countervailing duties following the privatization of...
Article
Facts of the Case On August 17, 1993, the United States Department of Commerce (USDOC) imposed definitive countervailing duties (CVDs) on carbon steel originating in Germany. The imposition of these duties was based on an investigation by USDOC in which it was determined that certain German producers had benefited from five countervailable subsidy...
Article
[eng] We present a two-sided search model where agents differ by their human capital endowment and where workers of different skill are imperfect substitutes. Then the labor market endogenously divides into disjoint segments and wage inequality will depend on the degree of labor market segmentation. The most important results are : 1) overall wage...
Article
This paper complements the findings of Atal, Ñopo and Winder (2009) on gender and ethnic wage gaps for 18 Latin American countries circa 2005 by analyzing gender wage gaps for the same countries between circa 1992 and circa 2007. During this span the overall gender earnings gaps dropped about 7 percentage points, while the unexplained component dro...
Article
We study the incentives that governments have to protect intellectual property in a trading world economy. We consider a world economy with ongoing innovation in two countries that differ in market size and in their capacity for innovation. After describing the determination of national patent policies in a noncooperative regime of patent protectio...
Article
this paper, Glycerol (C00116), Fatty acid (C00162), and ATP (C00002) are externally supplied at a constant rate (table 3). That is, these values are not subject to evolutionary change during the run
Article
I study the interaction between imperfect labor contracts and international trade in a setting in which workers have private information about their own abilities. When an individual's contribution to firm output can be measured accurately in some activities but not in others, the most able workers select occupations in which their pay most closely...
Article
Full-text available
This dispute between the European Communities and the United States originated when the United States amended its copyright law in a way that nullified and impaired certain benefits promised to the European Communities under the Agreement on Trade Related Aspects of Intellectual Property (TRIPs). Article 9.1 of TRIPs requires all WTO members to com...
Article
We study the determinants of the extent of outsourcing and of direct foreign investment in an industry in which producers need specialized components. Potential suppliers must make a relationship-specific investment in order to serve each prospective customer. Such investments are governed by imperfect contracts. A final-good producer can manufactu...
Article
In 1993, the US Department of Commerce began to levy countervailing duties on imports of certain leaded bars from the United Kingdom. The United States applied tariffs to goods imported from British Steel Engineering Steels, a subsidiary of British Steel plc. Following investigations by the US Department of Commerce and the United States Internatio...
Article
We develop a model in which the heterogeneous firms in an industry choose their modes of organization and the location of their subsidiaries or suppliers. We assume that the principals of a firm are constrained in the nature of the contracts they can write with suppliers or employees. Our main result concerns the sorting of firms with different pro...
Book
Full-text available
This landmark theoretical book is about the mechanisms by which special interest groups affect policy in modern democracies. Defining a special interest group as any organization that takes action on behalf of an identifiable group of voters, Gene Grossman and Elhanan Helpman ask: How do special interest groups derive their power and influence? Wha...
Article
Full-text available
We develop an equilibrium model of industrial structure in which the organization of firms is endogenous. Differentiated consumer products can be produced either by vertically integrated firms or by pairs of specialized companies. Production of each variety of consumer good requires a specialized component. Vertically integrated firms can manufactu...
Article
This dispute concerns the imposition of a definitive safeguard measure by the United States on imports of circular welded carbon quality line pipe (“line pipe”) from Korea (WTO DOC. WTO/DS 202/AB/R). The measure was imposed following an investigation conducted by the US International Trade Commission (USITC). The USITC determined in a safeguard inv...
Article
We develop a model in which the heterogeneous firms in an industry choose their modes of organization and the location of their subsidiaries or suppliers. We assume that the principals of a firm are constrained in the nature of the contracts they can write with suppliers or employees. Our main result concerns the sorting of firms with different pro...
Article
We study the determinants of the location of subcontracted activity in a general equilibrium model of outsourcing and trade. We model outsourcing as an activity that requires search for a partner and relationship-specific investments that are governed by incomplete contracts. The extent of international outsourcing depends inter alia on the thickne...
Article
Full-text available
We develop an equilibrium model of industrial structure in which the organization of firms is endogenous. Differentiated consumer products can be produced either by vertically integrated firms or by pairs of specialized companies. Production of each variety of consumer good requires a unique, specialized component. Vertically integrated firms can m...
Article
We develop an endogenous growth model with R&D spillovers to study the long-run consequences of offshoring with firm heterogeneity and incomplete contracts. In so doing, we model offshoring as the geographical fragmentation of a firm's production chain between a home upstream division and a foreign downstream division. While there is always a posit...
Article
We characterize efficient self-enforcing divisions of political or economic surplus between two parties that interact repeatedly. The party in power can decide the allocation, and the parties' political strength changes according to a Markov process. We find that the share of the party currently in power depends not only on its current strength bur...
Article
We develop a competitive model of trade between countries with similar aggregate factor endowments. The trade pattern reflects differences in the distribution of talent across the labor forces of the two countries. The country with a relatively homogeneous population exports the good produced by a technology with complementarities between tasks. Th...
Article
Full-text available
We develop a procedure to rank-order objects using censored panel data sets. We illustrate this by ranking countries and commodities using dis-aggregated American import data. We find evidence that countries and commodities can be ranked. Countries habitually begin to export goods to the United States according to an ordering; goods are also export...
Article
We develop an equilibrium model of industrial structure in which the organization of firms is endogenous. Differentiated consumer products can be produced either by vertically integrated firms or by pairs of specialized companies. Production of each variety of consumer good requires a unique, specialized component. Vertically integrated firms can m...
Article
Full-text available
Endorsements are a simple language for communication between interest group leaders and group members. The members, who share policy concerns, may not perfectly understand where their interests lie on certain issues. If their leaders cannot fully explain the issues, they can convey some information by endorsing a candidate or party. When interest g...
Article
In an economy with imperfect labor contracts, differences in the distribution of human capital are an independent source of comparative advantage. I study a world economy with two sectors, one where output is produced by teams and another where individuals can work alone. When workers' abilities are private information and workers cannot verify the...
Article
We study the politics of intergenerational redistribution in an overlapping generations model with short-lived governments. The successive governments—who care about the welfare of the currently living generations and possibly about campaign contributions—are unable to pre-commit the future course of redistributive taxation. In a stationary politic...
Article
We study political compromise founded on tacit cooperation. Two political parties must share a fixed pie in each of an infinite sequence of periods. In each period, the party in power has ultimate authority to divide the pie. Power evolves according to a Markov process among a set of political states corresponding to different degrees of political...
Article
We investigate whether a welfare-maximizing government ought to pursue a programme of strategic trade intervention or instead commit itself to free trade when, in the former case, domestic firms will have an opportunity to manipulate the government’s choice of the level of intervention. Domestic firms may over-invest in physical and knowledge capit...
Article
We develop a competitive model of trade between countries with similar aggregate factor endowments. The trade pattern reflects differences in the distribution of talent across the labor forces of the two countries. The country with a relatively homogeneous population exports the good produced by a technology with complementarities between tasks. Th...
Article
Inn an econommy with imperfect labor contracts, differences in the distribution of human capital are an independent source of comparative advantage. I study a world economy with two sectors, one where output is produced by teams and another where individuals can work alone.
Article
Endorsements are a simple language for communication between interest-group leaders and group members. The members, who share policy concerns, may not perfectly understand where their interests lie on certain issues. If their leaders cannot fully explain the issues, they can convey some information by endorsing a candidate or party. When interest g...
Chapter
International trade flows are guided by a variety of forces, including tastes, technologies, factor endowments, and domestic and foreign policies. Early classical writers emphasized cross-country differences in technological capabilities as the principal cause of trade. But models focusing on disparities in factor endowments came to dominate thinki...
Article
Full-text available
The authors develop a model of common agency with complete information and general preferences with nontransferable utility, and they prove that the principals' Nash equilibrium in truthful strategies implements an efficient action. The authors apply this theory to the construction of a positive model of public finance, where organized special inte...
Article
We develop a model of common agency with complete information and general preferences with non-transferable utility, and prove that the principals’ Nash equilibrium in truthful strategies implements an efficient action. We apply this theory to construct a positive model of public finance, where organized special interests can lobby the government f...
Article
We study the electoral competition between two parties vying for seats in a legislature. The electorate includes knowledgeable voters and impressionable voters, the latter susceptible to electioneering activities. A special interest group provides campaign financing in exchange for influence over the platforms. The parties take positions on two iss...
Article
We study the politics of intergenerational redistribution in an overlapping generations model with short-lived governments.
Article
Full-text available
We study the electoral competition between two parties vying for seats in a legislature. The electorate includes knowledgeable voters and impressionable voters, the later susceptible to electioneering activities.
Article
Full-text available
We study the competition between two political parties for seats in a legislature. The parties have fixed positions on some issues, but vary their positions on others in order to attract votes and campaign contributions. In this context, we examine whether special interest groups are governed by an electoral motive or an influence in their campaign...

Network

Cited By