Abstract
Since the early 1990s, as the United States borrowed heavily from the rest of the world, employment in the US goods-producing sector has fallen. We construct a dynamic general equilibrium model with several mechanisms that could generate declining goods-sector employment: foreign borrowing, nonhomothetic preferences, and differential productivity growth across sectors. We find that only 15.1 percent of the decline in goods-sector employment from 1992 to 2012 stems from US trade deficits; most of the decline is due to differential productivity growth. As the United States repays its debt, its trade balance will reverse, but goods-sector employment will continue to fall.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 761-796 |
| Number of pages | 36 |
| Journal | Journal of Political Economy |
| Volume | 126 |
| Issue number | 2 |
| DOIs | |
| State | Published - Apr 2018 |
Bibliographical note
Funding Information:and Ruhl gratefully acknowledge the support of the National Science Foundation under grant SES-0962993. We are grateful to Jack Rossbach for extraordinary research assistance. The data and computer code used here can be found in the online supplementary materials. The views expressed herein are those of the authors and not necessarily those of the Federal Reserve Bank of Minneapolis or the Federal Reserve System.
Publisher Copyright:
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