US Manufacturing: Understanding Its Past and Its Potential Future

Martin Neil Baily and Barry Bosworth

Journal of Economic Perspectives, 2014, vol. 28, issue 1, 3-26

Abstract: The development of the US manufacturing sector over the last half-century displays two striking and somewhat contradictory features: 1) the growth of real output in the US manufacturing sector, measured by real value added, has equaled or exceeded that of total GDP, keeping the manufacturing share of the economy constant in price-adjusted terms; and 2) there is a long-standing decline in the share of total employment attributable to manufacturing. The persistence of these trends seems inconsistent with stories of a recent or sudden crisis in the US manufacturing sector. After all, as recently as 2010, the United States had the world's largest manufacturing sector measured by its valued-added, and while it has now been surpassed by China, the United States remains a very large manufacturer. On the other hand, there are some potential causes for concern. First, though manufacturing's output share of GDP has remained stable over 50 years, and manufacturing retains a reputation as a sector of rapid productivity improvements, this is largely due to the spectacular performance of one subsector of manufacturing: computers and electronics. Second, recently there has been a large drop in the absolute level of manufacturing employment that many find alarming. Third, the US manufacturing sector runs an enormous trade deficit, equaling $460 billion in 2012, which is also very concentrated in trade with Asia. Finally, we consider the future evolution of the manufacturing sector and its importance for the US economy. Many of the largest US corporations continue to shift their production facilities overseas. It is important to understand why the United States is not perceived to be an attractive base for their production.

JEL-codes: E23 L60 (search for similar items in EconPapers)
Date: 2014
Note: DOI: 10.1257/jep.28.1.3
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (63)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/jep.28.1.3 (application/pdf)
http://www.aeaweb.org/jep/ds/2801/2801-0003_ds.zip (application/zip)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:jecper:v:28:y:2014:i:1:p:3-26

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

Journal of Economic Perspectives is currently edited by Enrico Moretti

More articles in Journal of Economic Perspectives from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().