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Dynamic Adjustments to Terms of Trade Shocks: The USA Productivity Boom and Australia

Richard Harris and Peter Robertson ()

No 2007-16, Discussion Papers from School of Economics, The University of New South Wales

Abstract: How has the USA’s “new economy” productivity boom affected Australia? We consider this question using a dynamic multi-sector growth model of the Australian and USA economies. We find that productivity growth in the USA durables sector generates small but important gains to Australia. We find that the transmission of growth is generated through increased export demand for Agriculture. Consequently we find that the USA’s productivity growth tends to favour Australia’s traditional export sectors. Likewise it increases the relative demand for less skilled labour in Australia and reduces the demand for skilled labour and higher education.

Keywords: Terms of Trade; Productivity; Economic Growth; Human Capital; Computable General Equilibrium Models (search for similar items in EconPapers)
Pages: 31 pages
Date: 2007-06
New Economics Papers: this item is included in nep-cmp, nep-eff, nep-hrm, nep-int and nep-opm
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