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Does fast Growth in India and China harm U.S. Workers? Insights from Simulation Evidence

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  • Alex Izurieta
  • Ajit Singh

Abstract

A major political and policy issue today is whether globalisation and rapid economic growth in India and China would have an adverse affect on labour markets in the U.S. and other advanced countries. Some leading economists have argued that even though the recent integration of India and China with the liberalised global economy has not so far had a serious negative impact on wages and employment in advanced countries, it is most likely to do so in the future in view of the growing technological and scientific capabilities in the two developing countries. This is also because it is suggested that this integration represents a sudden doubling of the world labour force without a concomitant increase in capital. The present paper argues against this plausible thesis, essentially on two grounds: (a) it does not take into account the demand side effects of fast growth in India and China; and (b) it abstracts from the dynamism of the U.S. real economy and its innovative large corporations. However, simulations of different scenarios on the CAM world econometric model indicate that at a disaggregated level there are severe supply side constraints on energy, raw materials and food which thwart the expansionary demand side effects of fast growth in India and China.

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Bibliographic Info

Paper provided by ESRC Centre for Business Research in its series ESRC Centre for Business Research - Working Papers with number wp378.

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Date of creation: Dec 2008
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Handle: RePEc:cbr:cbrwps:wp378

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Related research

Keywords: Globalisation; China and India; Simulation; U.S. Workers; Economic integration;

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  1. Singh, Ajit, 2003. "Special and Differential Treatment, The Multilateral Trading System and Economic Development in the 21st Century," MPRA Paper 24653, University Library of Munich, Germany.
  2. (No last name available), Himanshu, 2013. "Poverty and Food Security in India," ADB Economics Working Paper Series 369, Asian Development Bank.
  3. Richard B. Freeman, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer.
  4. Ajit Singh & Sukti Dasgupta, 2005. "Will services be the new engine of economic growth in India?," ESRC Centre for Business Research - Working Papers wp310, ESRC Centre for Business Research.
  5. Singh, Ajit, 2007. "Globalisation, industrial revolutions in India and China and labour markets in advanced countries: implications for national and international economic policy," MPRA Paper 53369, University Library of Munich, Germany.
  6. Singh, Ajit, 1977. "UK Industry and the World Economy: A Case of De-industrialisation?," Cambridge Journal of Economics, Oxford University Press, vol. 1(2), pages 113-36, June.
  7. Martin Neil Baily & Robert Z. Lawrence, 2004. "What Happened to the Great U.S. Job Machine? The Role of Trade and Electronic Offshoring," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 35(2), pages 211-284.
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