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Domestic Distortions and the Deindustrialization Hypothesis

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Paul Krugman

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Abstract

It is widely believed that U.S. trade deficits have displaced workers from highly paid manufacturing jobs into less well-paid service employment, contributing to declining incomes for the nation as a whole. Although proponents of this view do not usually think of it this way, this analysis falls squarely into the `domestic distortions' framework pioneered by Jagdish Bhagwati. This paper models the deindustrialization hypothesis explicitly as a domestic distortions issue, and shows that while it makes conceptual sense it is of limited quantitative importance.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5473.

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Date of creation: Mar 1996
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Handle: RePEc:nbr:nberwo:5473

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  1. Brecher, Richard A., 1974. "Optimal commercial policy for a minimum-wage economy," Journal of International Economics, Elsevier, vol. 4(2), pages 139-149, May. [Downloadable!] (restricted)
  2. Jeffrey D. Sachs & Howard J. Shatz, 1994. "Trade and Jobs in Manufacturing," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1994-1), pages 1-84. [Downloadable!]
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  1. David Kucera & William Milberg, 2003. "Deindustrialization and changes in manufacturing trade: Factor content calculations for 1978–1995," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 139(4), pages 601-624, December. [Downloadable!] (restricted)
  2. David Kucera & William Milberg, 2004. "Deindustrialization and changes in manufacturing trade: Factor content calculations for 1978–1995," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 140(3), pages 601-624, September. [Downloadable!] (restricted)
  3. Guillaume Daudin & Jean-Luc Gaffard & Sandrine Levasseur & Caterine Mathieu & George Pujal & Michel Quéré & Henri Sterdinyak, 2005. "Competition from emerging countries, international relocation and their impacts on employment," Documents de Travail de l'OFCE 2005-09, Observatoire Francais des Conjonctures Economiques (OFCE). [Downloadable!]
  4. Jean-Paul Fitoussi & Eloi Laurent, 2008. "North by Northwest: What’s Wrong with the French Model and How Can the Nordic Model Help," Documents de Travail de l'OFCE 2008-18, Observatoire Francais des Conjonctures Economiques (OFCE). [Downloadable!]
  5. Arvind Panagariya, 2003. "Bhagwati Ramaswami: Why is it a Classic," International Trade 0308004, EconWPA. [Downloadable!]
  6. Jean-Luc Gaffard & Francesco Saraceno, 2007. "International Trade and Domestic Distortions: Modelling the Transition Process," Documents de Travail de l'OFCE 2007-18, Observatoire Francais des Conjonctures Economiques (OFCE). [Downloadable!]
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