Global rebalancing: Effects on trade and employment
AbstractA sustained reduction of global current-account imbalances must include a decline in the share of household consumption in aggregate demand in the United States and the opposite development in China. Accordingly, import demand would decline in the United States and increase in China. Given non-homothetic demand preferences, the resulting change in the income distribution of global import demand affects both the intensity and pattern of other countries’ exports. Simulations suggest that, for the world economy, the net effect of this shift would be a decline in industrial exports, especially from labor-intensive sectors producing consumer durables. A multilaterally coordinated rebalancing that would also include an increase in the share of household consumption in aggregate demand of developed country surplus economies would reduce these adverse effects on trade and employment. Apart from the countries undertaking rebalancing, developing countries in East and South-East Asia face the greatest adjustment pressure from global rebalancing.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Asian Economics.
Volume (Year): 23 (2012)
Issue (Month): 6 ()
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Global imbalances; China; United States; Import composition; Non-homothetic demand preferences;
Find related papers by JEL classification:
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
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