Domestic Distortions and the Deindustrialization Hypothesis

31 Pages Posted: 8 Aug 2012

See all articles by Paul R. Krugman

Paul R. Krugman

Princeton University - Woodrow Wilson School of Public and International Affairs; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Date Written: March 1996

Abstract

It is widely believed that U.S. trade deficits have displaced workers from highly paid manufacturing jobs into less well-paid service employment, contributing to declining incomes for the nation as a whole. Although proponents of this view do not usually think of it this way, this analysis falls squarely into the `domestic distortions' framework pioneered by Jagdish Bhagwati. This paper models the deindustrialization hypothesis explicitly as a domestic distortions issue, and shows that while it makes conceptual sense it is of limited quantitative importance.

Suggested Citation

Krugman, Paul R., Domestic Distortions and the Deindustrialization Hypothesis (March 1996). NBER Working Paper No. w5473. Available at SSRN: https://ssrn.com/abstract=4129

Paul R. Krugman (Contact Author)

Princeton University - Woodrow Wilson School of Public and International Affairs ( email )

Princeton University
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United States
609-258-4570 (Phone)
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Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

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United States

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