Dixon, Peter, Rimmer, Maureen T and Waschik, Robert ORCID: 0000-0001-9306-1803 (2017) Macro, industry and regional effects of eliminating Buy America(n) programs: USAGE simulations. Working Paper. Centre of Policy Studies (CoPS), Victoria University.

Abstract

The U.S. government attempts to stimulate employment, especially in the manufacturing sector, by favoring U.S. contractors for public sector projects (Buy American regulations) and by insisting that these contractors themselves favor domestic suppliers of inputs such as steel (Buy America regulations). We refer to these policies collectively as Buy America(n). Using a detailed computable general equilibrium model, we demonstrate that Buy America(n) policies are counter-productive. The main reason is that they increase costs to the U.S. government. Scrapping these policies would reduce employment in manufacturing but boost employment in the rest of the economy with a net gain of about 306 thousand jobs. Even in the manufacturing sector, there would be many winning industries including those producing machinery and other high-tech products. Employment would increase in 50 out of 51 states and 430 out of 436 congressional districts.

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