Does fast Growth in India and China harm U.S. Workers? Insights from Simulation Evidence

Alex Izurieta and Ajit Singh

Working Papers from Centre for Business Research, University of Cambridge

Abstract: A major political and policy issue today is whether globalisation and rapid economic growth in India and China would have an adverse affect on labour markets in the U.S. and other advanced countries. Some leading economists have argued that even though the recent integration of India and China with the liberalised global economy has not so far had a serious negative impact on wages and employment in advanced countries, it is most likely to do so in the future in view of the growing technological and scientific capabilities in the two developing countries. This is also because it is suggested that this integration represents a sudden doubling of the world labour force without a concomitant increase in capital. The present paper argues against this plausible thesis, essentially on two grounds: (a) it does not take into account the demand side effects of fast growth in India and China; and (b) it abstracts from the dynamism of the U.S. real economy and its innovative large corporations. However, simulations of different scenarios on the CAM world econometric model indicate that at a disaggregated level there are severe supply side constraints on energy, raw materials and food which thwart the expansionary demand side effects of fast growth in India and China.

Keywords: Globalisation; China and India; Simulation; U.S. Workers; Economic integration (search for similar items in EconPapers)
JEL-codes: F01 J20 J21 (search for similar items in EconPapers)
Date: 2008-12
New Economics Papers: this item is included in nep-cmp, nep-cna, nep-cwa, nep-dev and nep-fdg
Note: PRO-2
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Citations: View citations in EconPapers (1)

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