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The OPEC Surplus and U.S.-LDC Trade

  • William H. Branson
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    This paper explores the connections between the shift of world saving toward OPEC and the changing structure of U.S. trade with the non-oil developing countries. The basic point of the paper is that during the 1970s the U.S. economy has become more interdependent through trade with the newly industrializing countries (NICs) in the developing world. The shift of world saving toward OPEC in the 1970s effectively internationalized the supply of saving, as OPEC places its surplus in the international financial system. The NICs and other developing countries borrow the surplus and direct it to domestic investment. Investment in the NICs stimulates the demand for U.S. capital goods. The reallocation of resources towards capital goods production in the U.S. stimulates excess demand for consumer goods, which appear as imports from the NICs. U.S. exports of capital goods to these countries have grown rapidly in the 1970s as have U.S. imports of non-food, non-auto consumer goods from them. Thus the structure of U.S. trade has been reoriented to become complementary with the rapidly- growing developing countries, and perhaps more competitive with Europe and Japan.

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    File URL: http://www.nber.org/papers/w0791.pdf
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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0791.

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    Date of creation: Oct 1981
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    Handle: RePEc:nbr:nberwo:0791
    Note: ITI IFM
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    1. Lewis, Arthur, 1979. "The Slowing Down of the Engine of Growth," Nobel Prize in Economics documents 1979-2, Nobel Prize Committee.
    2. David Lipton & Jeffrey Sachs, 1980. "Accumulation and Growth in a Two-Country Model: A Simulation Approach," NBER Working Papers 0572, National Bureau of Economic Research, Inc.
    3. William H. Branson & Julio J. Rotemberg, 1981. "International adjustment with wage rigidity," NBER Chapters, in: International Seminar on Macroeconomics, pages 309-332 National Bureau of Economic Research, Inc.
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