On the Decline of Manufacturing Productivity Growth and Employment
Sunday, Jan. 7, 2018 1:00 PM - 3:00 PM
- Chair: Susan Houseman, W.E. Upjohn Institute for Employment Research
Relative Prices, Hysteresis and the Decline of American Manufacturing
AbstractThis study uses new measures of real exchange rates to study the collapse of US manufacturing employment in the early 2000s in historical and international perspective. To identify a causal impact of RER movements on manufacturing, I compare the US experience in the early 2000s to the 1980s, when large fiscal deficits led to a sharp appreciation of the dollar, and to Canada's experience in the mid-2000s, when high oil prices and a falling US dollar led to an equally sharp appreciation of the Canadian dollar. Using disaggregated sectoral data and a difference-in-difference methodology, I find that a temporary appreciation in relative unit labor costs for the US leads to persistent declines in employment, output, and productivity in relatively more open manufacturing sectors. The appreciation of US relative unit labor costs can plausibly explain more than two-thirds of the decline in manufacturing employment in the early 2000s.
Trade and Innovation — Comparing Evidence from Three Different Sources of Import Competition
- A1 - General Economics