The OPEC Surplus and U.S.-Ldc Trade

42 Pages Posted: 4 Mar 2007 Last revised: 15 Mar 2015

See all articles by William H. Branson

William H. Branson

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

Date Written: October 1981

Abstract

This paper explores the connections between the shift of world saving toward OPEC and the changing structure of U.S. trade with the non-oil developing countries. The basic point of the paper is that during the 1970s the U.S. economy has become more interdependent through trade with the newly industrializing countries (NICs) in the developing world. The shift of world saving toward OPEC in the 1970s effectively internationalized the supply of saving, as OPEC places its surplus in the international financial system. The NICs and other developing countries borrow the surplus and direct it to domestic investment. Investment in the NICs stimulates the demand for U.S. capital goods. The reallocation of resources towards capital goods production in the U.S. stimulates excess demand for consumer goods, which appear as imports from the NICs. U.S. exports of capital goods to these countries have grown rapidly in the 1970s as have U.S. imports of non-food, non-auto consumer goods from them. Thus the structure of U.S. trade has been reoriented to become complementary with the rapidly- growing developing countries, and perhaps more competitive with Europe and Japan.

Suggested Citation

Branson, William H., The OPEC Surplus and U.S.-Ldc Trade (October 1981). NBER Working Paper No. w0791. Available at SSRN: https://ssrn.com/abstract=967943

William H. Branson (Contact Author)

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

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National Bureau of Economic Research (NBER)

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