| Abstract: | The transfer of automobile production by Japanese firms to the United States represents a giant direct foreign investment. Using the disaggregated NIRA U.S.-Japan model in the framework of Project LINK, this article evaluates the impact of these investments on the U.S. and Japanese economies. The benefit in terms of auto production, capacity, employment, activity in supplier industries, and aggregate GNP in the United States is readily apparent. Japanese industry has incentives to move production into the United States to avoid protectionism and to guard against adverse movements of the exchange rate and production costs, but there is some loss in output and related variables in Japan. |
