Report

Global imbalances and structural change in the United States


Abstract: Since the early 1990s, as the United States has borrowed from the rest of the world, employment in U.S. goods-producing sectors has fallen. Using a dynamic general equilibrium model, we find that rapid productivity growth in goods production, not U.S. borrowing, has been the most important driver of the decline in goods-sector employment. As the United States repays its debt, its trade balance will reverse, but goods-sector employment will continue to fall. A sudden stop in foreign lending in 2015?2016 would cause a sharp trade balance reversal and painful reallocation across sectors, but would not affect long-term structural change.

Keywords: Trade;

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Provider: Federal Reserve Bank of Minneapolis

Part of Series: Staff Report

Publication Date: 2013

Number: 489