Can growth in China be bad for the U.S.?
Greg Mankiw discusses a topic we discussed (in both 340 and 740) on the effects of productivity growth in China on US incomes via changes in world prices in his blog. This would make a good midterm exam question!
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This email isn’t intended to promote the viewing of The Colbert Report on Comedy Central, nor should one be getting their current events from this show, but the other night I was watching an informative interview with Senator Byron L. Dorgan of North Dakota who recently published a book titled, “Take this job and ship it.” The first thing that came to mind was Professor Conning’s blog on international trade and how this interview is relevant to this article.
You might think the Senator is just another democrat who is attacking the corporations for making lots of money, but the interview was more concerned with the topics we’re covering in class. Senator Dorgan mentions economic and politic factors that are deteriorating America’s middle class, which is a result of jobs being sent to foreign countries, where workers have much lower wages (more labor intensive producing country, like China). It seems Heckscher, Ohlin, and Samuelson were completely accurate in stating their conditions for restricting government intervention and advocating pure competition in their theories. It’s also funny that Pietra Rivoli’s book also has similar negative views on government intervention.
Did you know that the Fig Newton is being made in Mexico? Why don’t they just call it the Jalapeno Newton? Just Kidding, a little patriotic joke Colbert mentioned on his show.
Andreas Spartalis
But I missed that particular interview.
One thing that needs to be clarified is what it means to be 'exporting jobs.'
You might argue that if we hadn't exported jobs, we'd all still be laboring in textile mills. Instead today many of our workers are in better jobs in Hollywood, computer software programming, etc; sectors that expanded because of an expansion of exports.
Also in what sense are we 'losing jobs.' If you look at the US unemployment rate (you get get a graph at http://data.bls.gov/) you'll see that at 4.7 percent unemployment, which is at or below the average for the past 50 years. So are we losing jobs?
Of course individuals do lose jobs if their factory is shut by foreign competition. The question is whether their next job will be better or worse. Each of the trade models we've studies has given a slight different answer to what happens to real-wages, but each of them in their own way gives us tools for answering that question on a case by case basis.