Title

Macroeconomic and Sectoral Effects of International Trade: A Vector Error-Correction Study

Document Type

Article

Publication Date

3-2005

Source Publication

Atlantic Economic Journal

Source ISSN

0197-4254

Abstract

This study examines various claims that in the U.S., international trade has contributed to a loss of manufacturing base, an increased gap between unskilled and skilled wages, lower employment, and a loss of productivity. Cointegration tests indicate that in the long run and at the macro level, the ratio of trade to output and FDI to output are correlated with the manufacturing share of output, the ratio of unskilled to skilled wages, labor productivity, and the employment rate. However, Granger causality tests reveal that, with one exception, causation does not run from trade to the domestic variables, the only exception being that FDI Granger causes productivity. When the focus is shifted to the manufacturing sector, the results support the proposition that openness to trade has had adverse effects on this sector.

Comments

Atlantic Economic Journal, Vol. 33, No. 1 (March 2005): 43-54. DOI.