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Global Effects of US “New Economy” Shocks: the Role of Capital-Skill Complementarity

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  • Tyers, Rodney
  • Yang, Yongzheng

Abstract

We characterise “new economy” shocks as capital or skill augmentation, associated with the increasing prominence of computers in the capital stock particularly in the US, and an increase in US investment at least partially financed from abroad. A short-run comparative static analysis of these shocks using a global comparative static multi-product macroeconomic model confirms that the US technology shocks alone expand the US and global economies. The investment shock, however, is associated with a flood of foreign savings into the US economy the effects of which are more "zero sum” in nature. In the US the technology shocks alone advantage agriculture and mining by more with capital-skill complementarity but they are disadvantaged, however, by the real exchange rate effects of the investment shock. The combined US shocks contract the Canadian and Australasian economies though the net effects on their agricultures are small and mining gains.

Suggested Citation

  • Tyers, Rodney & Yang, Yongzheng, 2001. "Global Effects of US “New Economy” Shocks: the Role of Capital-Skill Complementarity," 2001 Conference (45th), January 23-25, 2001, Adelaide, Australia 125983, Australian Agricultural and Resource Economics Society.
    • Handle: RePEc:ags:aare01:125983
    DOI: 10.22004/ag.econ.125983
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    References listed on IDEAS

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    Cited by:

    1. Rees, Lucy & Tyers, Rod, 2004. "Trade reform in the short run: China's WTO accession," Journal of Asian Economics, Elsevier, vol. 15(1), pages 1-31, February.

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