Much of the apparent deindustrialization of the US economy is a continuation of long-term trends, but at least part of it is indicative of declining competitiveness. A 3rd factor possibly affecting the rate of deindustrialization may be the interaction of macroeconomic policy with the structure of labor markets. This tentative conclusion is based on an analysis of the US economy using the Scandinavian model of inflation. This model is based on 2 major premises: 1. Production is divided into the export sector and the sheltered sector, which produces nontraded goods. 2. Wages spill over between sectors because workers have a conception of fair relative wage differentials. The analysis shows that the movement up the Phillips curve corresponds to increased employment in the sheltered sector. Other research seems to indicate a correlation between deindustrialization and aggregate demand stimulus.
