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Global imbalances and structural change in the United States

  • Timothy J. Kehoe
  • Kim J. Ruhl
  • Joe Steinberg

Since the early 1990s, as the United States has borrowed from the rest of the world, employment in U.S. goods-producing sectors has fallen. Using a dynamic general equilibrium model, we find that rapid productivity growth in goods production, not U.S. borrowing, has been the most important driver of the decline in goods-sector employment. As the United States repays its debt, its trade balance will reverse, but goods-sector employment will continue to fall. A sudden stop in foreign lending in 2015–2016 would cause a sharp trade balance reversal and painful reallocation across sectors, but would not affect long-term structural change.

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Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 489.

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Date of creation: 2013
Date of revision:
Handle: RePEc:fip:fedmsr:489
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