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Domestic Distortions and the Deindustrialization Hypothesis

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  • Paul Krugman

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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Bibliographic Info

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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Publication status: published as Feenstra, Robert C., Gene M. Grossman, and Douglas A. Irwin. The political economy of trade policy: Papers in honor of Jagdish Bhagwati. Cambridge and London: MIT Press, 1996.
Handle: RePEc:nbr:nberwo:5473

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  1. Stephen Nickell & D. Nicolitsas, 1994. "Wages," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 51644, London School of Economics and Political Science, LSE Library.
  2. Brecher, Richard A., 1974. "Optimal commercial policy for a minimum-wage economy," Journal of International Economics, Elsevier, Elsevier, vol. 4(2), pages 139-149, May.
  3. 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(1), pages 1-84.
  4. Paul Krugman & Robert Lawrence, 1993. "Trade, Jobs, and Wages," NBER Working Papers 4478, National Bureau of Economic Research, Inc.
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Cited by:
  1. 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, Observatoire Francais des Conjonctures Economiques (OFCE) 2008-18, Observatoire Francais des Conjonctures Economiques (OFCE).
  2. Arvind Panagariya, 2003. "Bhagwati Ramaswami: Why is it a Classic," International Trade, EconWPA 0308004, EconWPA.
  3. Guillaume Daudin & Jean-Luc Gaffard & Sandrine Levasseur & Catherine Mathieu & Georges Pujals & Michel Quéré & Henri Sterdyniak, 2005. "Competition from emerging countries, international relocation and their impacts on employment," Sciences Po publications 2005-9, Sciences Po.
  4. Miljkovic, Dragan & Paul, Rodney, 2008. "Income Effects on the Trade Balance in the United States: Analysis by Sector," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, Southern Agricultural Economics Association, vol. 40(03), December.
  5. Teck Hoon, Hian, 1999. "Intraindustry trade, high-wage jobs, and the wage gap," Economics Letters, Elsevier, Elsevier, vol. 65(2), pages 213-220, November.
  6. David Kucera & William Milberg, 2004. "Deindustrialization and changes in manufacturing trade: Factor content calculations for 1978–1995," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 140(3), pages 601-624, September.
  7. Jean-Luc Gaffard & Francesco Saraceno, 2007. "International Trade and Domestic Distortions: Modelling the Transition Process," Sciences Po publications n°2007-18, Sciences Po.
  8. Jean-Paul Fitoussi & Eloi Laurent, 2009. "Macroeconomic and social policies in the EU 15 : the last two decades," Documents de Travail de l'OFCE, Observatoire Francais des Conjonctures Economiques (OFCE) 2009-20, Observatoire Francais des Conjonctures Economiques (OFCE).
  9. David Kucera & William Milberg, 2003. "Deindustrialization and changes in manufacturing trade: Factor content calculations for 1978–1995," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 139(4), pages 601-624, December.

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