Global Imbalances and Structural Change in the United States

41 Pages Posted: 17 Aug 2013

See all articles by Timothy J. Kehoe

Timothy J. Kehoe

University of Minnesota - Twin Cities - Department of Economics; National Bureau of Economic Research (NBER)

Kim J. Ruhl

New York University (NYU), Leonard N. Stern School of Business - Department of Economics

Joseph Steinberg

University of Toronto

Date Written: August 2013

Abstract

Since the early 1990s, as the United States borrowed heavily from the rest of the world, employment in the U.S. 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 U.S. 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.

Suggested Citation

Kehoe, Timothy J. and Ruhl, Kim Joseph and Steinberg, Joseph, Global Imbalances and Structural Change in the United States (August 2013). NBER Working Paper No. w19339, Available at SSRN: https://ssrn.com/abstract=2311588

Timothy J. Kehoe (Contact Author)

University of Minnesota - Twin Cities - Department of Economics ( email )

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Kim Joseph Ruhl

New York University (NYU), Leonard N. Stern School of Business - Department of Economics ( email )

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New York, NY NY 10012
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Joseph Steinberg

University of Toronto ( email )

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