Working Paper: NBER ID: w2190
Authors: Barry Eichengreen
Abstract: This paper provides an overview of recent trends in the U.S. basic industries. It first documents the dramatic fall in their shares of domestic employment and global production. It then considers explanations for these industries' relative -- and, in some instances, absolute -- decline. Those explanations fall into two categories: domestic explanations which focus on the decisions of labor, management and government, and international explanations which focus on the tendency of the product cycle to continually shift the production of established products and standardized processes to newly-industrializing countries. This review suggests that the recent difficulties of the U.S. basic industries have resulted not from one or the other of these factors but from their interplay. Insofar as product-cycle-based shifts in the international pattern of comparative advantage have contributed to recent difficulties, some decline in the U.S. basic industries is both inevitable -- barring increased protection -- and justifiable on efficiency grounds. Insofar as labor, management and government decisions share responsibility, the recent difficulties of U.S. basic industries may be at least partially reversible.
Keywords: US Basic Industries; International Competition; Product Cycle; Economic Policy
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Domestic management decisions (D13) | decline of US basic industries (L16) |
| High labor costs (J39) | decline of US basic industries (L16) |
| Government policies (H59) | decline of US basic industries (L16) |
| International competition (Z28) | decline of US basic industries (L16) |
| Product cycle (D25) | decline of US basic industries (L16) |
| decline of US basic industries (L16) | production shifts to newly industrializing countries (O14) |