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Macro, industry and regional effects of eliminating Buy America(n) programs: USAGE simulations

Author

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  • Peter B. Dixon
  • Maureen T. Rimmer
  • Robert G. Waschik

Abstract

The U.S. government attempts to stimulate employment, especially in the manufacturing sector, by favoring U.S. contractors for public sector projects (Buy American regulations) and by insisting that these contractors themselves favor domestic suppliers of inputs such as steel (Buy America regulations). We refer to these policies collectively as Buy America(n). Using a detailed computable general equilibrium model, we demonstrate that Buy America(n) policies are counter-productive. The main reason is that they increase costs to the U.S. government. Scrapping these policies would reduce employment in manufacturing but boost employment in the rest of the economy with a net gain of about 306 thousand jobs. Even in the manufacturing sector, there would be many winning industries including those producing machinery and other high-tech products. Employment would increase in 50 out of 51 states and 430 out of 436 congressional districts.

Suggested Citation

  • Peter B. Dixon & Maureen T. Rimmer & Robert G. Waschik, 2017. "Macro, industry and regional effects of eliminating Buy America(n) programs: USAGE simulations," Centre of Policy Studies/IMPACT Centre Working Papers g-271, Victoria University, Centre of Policy Studies/IMPACT Centre.
    • Handle: RePEc:cop:wpaper:g-271
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    References listed on IDEAS

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    1. Zahniser, Steven & Hertz, Thomas & Rimmer, Maureen T., 2012. "Immigration Policy and Its Possible Effects on U.S. Agriculture," Amber Waves:The Economics of Food, Farming, Natural Resources, and Rural America, United States Department of Agriculture, Economic Research Service, issue 02, pages 1-10, June.
    2. Peter B. Dixon & Maureen T. Rimmer & Marinos E. Tsigas, 2007. "Regionalising results from a detailed CGE model: Macro, industry and state effects in the U.S. of removing major tariffs and quotas," Papers in Regional Science, Wiley Blackwell, vol. 86(1), pages 31-55, March.
    3. K. Fox, Alan & Powers, William, 2008. "Textile and Apparel Barriers and Rules of Origin: What’s Left to Gain after the Agreement on Textiles and Clothing?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 23, pages 656-684.
    4. Steven Zahniser & Tom Hertz & Peter Dixon & Maureen Rimmer, 2012. "Immigration Policy and its Possible Effects on U.S. Agriculture and the Market for Hired Farm Labor: A Simulation Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(2), pages 477-482.
    5. Gary Clyde Hufbauer & Jeffrey J. Schott, 2009. "Buy American: Bad for Jobs, Worse for Reputation," Policy Briefs PB09-2, Peterson Institute for International Economics.
    6. Peter B. Dixon & Martin Johnson & Maureen T. Rimmer, 2011. "Economy‐Wide Effects Of Reducing Illegal Immigrants In U.S. Employment," Contemporary Economic Policy, Western Economic Association International, vol. 29(1), pages 14-30, January.
    7. Dixon, Peter B. & Rimmer, Maureen T., 2013. "Validation in Computable General Equilibrium Modeling," Handbook of Computable General Equilibrium Modeling, in: Peter B. Dixon & Dale Jorgenson (ed.), Handbook of Computable General Equilibrium Modeling, edition 1, volume 1, chapter 0, pages 1271-1330, Elsevier.
    8. Gary Clyde Hufbauer & Jeffrey J. Schott & Cathleen Cimino & Martin Vieiro & Erika Wada, 2013. "Local Content Requirements: A Global Problem," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 6802, October.
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    Cited by:

    1. Kutlina-Dimitrova, Zornitsa, 2018. "Government procurement: data, trends and protectionist tendencies," DG TRADE Chief Economist Notes 2018-3, Directorate General for Trade, European Commission.
    2. Dixon, Peter B. & Rimmer, Maureen T. & Waschik, Robert G., 2018. "Evaluating the effects of local content measures in a CGE model: Eliminating the US Buy America(n) programs," Economic Modelling, Elsevier, vol. 68(C), pages 155-166.

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    More about this item

    Keywords

    Buy America(n); local-content schemes; computable general equilibrium; regional modeling; U S manufacturing;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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