 Global rebalancing: Effects on trade and employmentJournal of Asian Economics, 2012, vol. 23, issue 6, 627-642 Abstract: A sustained reduction of global current-account imbalances must include a decline in the share of household consumption in aggregate demand in the United States and the opposite development in China. Accordingly, import demand would decline in the United States and increase in China. Given non-homothetic demand preferences, the resulting change in the income distribution of global import demand affects both the intensity and pattern of other countries’ exports. Simulations suggest that, for the world economy, the net effect of this shift would be a decline in industrial exports, especially from labor-intensive sectors producing consumer durables. A multilaterally coordinated rebalancing that would also include an increase in the share of household consumption in aggregate demand of developed country surplus economies would reduce these adverse effects on trade and employment. Apart from the countries undertaking rebalancing, developing countries in East and South-East Asia face the greatest adjustment pressure from global rebalancing. Keywords: Global imbalances; China; United States; Import composition; Non-homothetic demand preferences (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:23:y:2012:i:6:p:627-642 DOI: 10.1016/j.asieco.2012.01.003 Access Statistics for this article Journal of Asian Economics is currently edited by C. Wiemer More articles in Journal of Asian Economics from Elsevier |
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