Abstract
This paper investigates the effect a trade deficit has on GDP in the United States and if the effect is being lessened by the income and substitution effect. Employment will also be discussed in this paper as regression and cointegration analysis will be used to see what effect technology and the trade deficit have on employment in the manufacturing sector. The results suggest that trade deficit has a small negative effect on GDP. In addition, we find that technology advancement has more impact on employment than the trade deficit.
Similar content being viewed by others
References
Bodkin R (1977) Keynesian econometric concepts: consumption functions, investment functions, and “the” multiplier. In: Weintraub S (ed) Modern economic thought. University of Pennsylvania Press, Philadelphia, pp 67–92. University of Pennsylvania Press
Engle RF, Granger CWJ (1987) Co-integration and error correction: representation, estimation, and testing. Econometrica 55:251–276
Irwin D (2015) TradeJobs, and income distribution. In: Free trade under fire, 4th edn. Princeton University Press, Princeton, pp 114–163
Johansen S (1988) Statistical analysis of cointegration vectors. J Econ Dyn Control 12:231–254
Johansen S (1995) Likelihood-based inference in Cointegrated vector autoregressive models. Oxford University Press, Oxford
Johansen S, Juselius K (1990) Maximum likelihood estimation and inferences on Cointegration with applications to the demand for money. Oxf Bull Econ Stat 52:169–210
Mitchell J, Smith R, Weale M, Wright S, Salazar E (2005) An Indicator of monthly GDP and an early estimate of quarterly GDP growth. Econ J 115(501):F108–F129
Miyazawa K (1960) Foreign trade multiplier, input-output analysis and the consumption function. Q J Econ 74(1):53–64
Pesaran MH, Shin Y, Smith RJ (2001) Bounds testing approaches to the analysis of level relationships. J Appl Econ 16:289–326
Robbins L (1932) Consumption and the trade cycle. Economica 38:413–430
Scott RE (1998) U.S. trade deficits: causes, consequences, and policy implications
Zestos G, Tao X (2002) Trade and GDP growth: causal relations in the United States and Canada. South Econ J 68(4):859–874
Author information
Authors and Affiliations
Corresponding author
Additional information
Publisher’s note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Rights and permissions
About this article
Cite this article
Le, T.V., Baker, W. The effects of trade deficit on output and employment: evidence from the U.S.’s economy. Int Econ Econ Policy 17, 877–895 (2020). https://doi.org/10.1007/s10368-020-00464-4
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10368-020-00464-4