Abstract
The economic downturn faced by USA has led to reorientation of some of its key economic policies. The objective of this chapter is to analyze and investigate the consequences and ramifications of the reoriented US policies which are geared towards domestic employment generation. Using the “Cambridge Alphametrics Model of the world economy” we develop different scenarios to model these changes in US policies. Our simulation indicates that it will be difficult to generate reasonably high level of employment in USA by reducing government intervention. Such a policy would require private investment in the USA to reach around 20 % of GDP, a level not seen in the last 30 years of US history. An alternate simulation shows that increasing state intervention coupled with implementing moderately protectionist policies would likely ensure a moderate recovery for the USA. The second scenario is unlikely to have a major impact on employment and growth pattern of the rest of the world.
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The full document can be accessed here: http://www.gpo.gov/fdsys/pkg/CRPT-112hrpt421/pdf/CRPT-112hrpt421.pdf.
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More details about the model can be found in Izurieta and Singh (2010). Available at http://www.cbr.cam.ac.uk/pdf/WP378.pdf.
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We have not used private investment as an instrument variable to increase employment. Rather, we set a direct employment target and assume as employment increases private investment is required to increase but at what extent that will be decided by the model given the constraints fixed by us on expenditure and income.
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‘ACX’ includes countries Costa Rica, Cuba, Dominican Republic, Guatemala, Honduras, Haiti, Jamaica, Mexico, Nicaragua, Panama, El Salvador. ‘OD’ includes Australia, Canada, Israel, and New Zealand.
References
Cripps F, Gudgin G, Rhodes J (1979) Technical manual of the CEPG model of world trade. (Cambridge economic policy review, 3 June). University of Cambridge, Department of Applied Economics, Cambridge, pp. 1–27
Cripps F, Izurieta A, Singh A (2011) Global imbalances, under-consumption and overborrowing: the state of the world economy & future policies. MPRA paper 39049. University Library of Munich, Germany
Izurieta A, Singh A (2010) Does fast growth in India and China help or harm US workers? J Hum Dev Capabilities (Taylor and Francis Journals) 11(1):115–141
Lattimer RL (2010) The current state of the United States economy: a perspective. Competition forum. http://www.heldrich.rutgers.edu/sites/default/files/content/The_Current_State_of_the_United_States_Economy_A_Perspective.pdf
Acknowledgments
We thank Prof. Francis Cripps, Prof. Terry Mckinley and Prof. Prabhat Patnaik for their comments and suggestions.
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Appendix A
Appendix A
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© 2014 Springer India
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Pal, P., Guha, A. (2014). Global Ramifications of Reoriented US Policies Towards Employment Generation. In: Khasnabis, R., Chakraborty, I. (eds) Market, Regulations and Finance. India Studies in Business and Economics. Springer, New Delhi. https://doi.org/10.1007/978-81-322-1795-4_8
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DOI: https://doi.org/10.1007/978-81-322-1795-4_8
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