Working Paper: NBER ID: w1494
Authors: Gene M. Grossman
Abstract: Recently, the United States International Trade Commission conducted a Section 201 or "escape clause" hearing to determine whether imports have been the most significant cause of injury to the U.S. steel industry. This paper suggests a methodology for conducting the necessary analysis for such determinations, and applies it to the case of the steel industry. First, a reduced-form equation for steel industry employment is derived and estimated. The equation specifies industry employment as a function of the price of imported steel, the price of energy, the price of iron ore, a time trend, real income and (in one variant) the wage rate in the steel industry. The estimated coefficients are used to perform counter factual simulations, which allow us to attribute changes in industry employment to their proximate causes. The analysis reveals that for the period from 1976 to 1983, a secular shift away from employment in the steel industry has been the most important cause of injury. For the shorter period from 1979 to 1983, secular shift and import competition are roughly equal in importance, with the latter being entirely the result of the substantial appreciation of the U.S. dollar during this period.
Keywords: imports; steel industry; employment; econometric model; trade policy
JEL Codes: F10; F13; L60
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Secular decline in the steel industry (L52) | Job loss (J63) |
| Import competition (F14) | Job loss (J63) |
| Economic growth (O00) | Job loss (J63) |
| Wage increases in the steel industry (J39) | Job loss (J63) |
| Increases in energy prices (Q41) | Job loss (J63) |
| Appreciation of the U.S. dollar (F31) | Increase in import competition (F69) |