| The latest resurgence in the U.S. of policies aimed at reducing imports and bolstering domestic production has included the expansion of Buy American provisions. While some of these are new and untested, in this paper we evaluate long-standing procurement limitations on the purchase of foreign products by the U.S. Federal Government. We use procurement micro-data to first map and detect employment effects of government purchases and then to calibrate a quantitative trade model adapted to include features relevant to Buy American: a government sector, policy barriers in final and intermediate goods, labor force participation and external economies of scale. We show that, while current Buy American provisions on final goods purchase have created up to 100,000 jobs at a cost of roughly $110,000 per job, the recently announced tightening of the policy on the use of foreign inputs will create fewer jobs at a much higher cost of $237,000. We also find scant evidence of the use of Buy American rules as effective industrial policy. |
Peking University HSBC Business School(PHBS) University Town, Nanshan
District Shenzhen 518055, P.R.China
