The Economic Costs to the U.S. of Closing Its Borders: A Computable General Equilibrium Analysis

Publication Type: 
Authors: 
Peter B. Dixon
James Giesecke
Maureen T. Rimmer
Adam Z. Rose
Description/Abstract: 
J012TDO.a0aArem.012iyf1g.e04lGe0ion-sn8r2ic.ae G06e&ls/ 9ie1aA e4cFn0srk rde2(teaipc 4cPnkr2liceen6ia@st9c)4/eb1. 2uE40s7ce1o6c0n-o8.o4.2mm961oi7c6n s(5ao8snhl.iendeu).au We use a CGE model to simulate the effects of a one-year US border closure. Relative to previously used input–output modeling, CGE modeling offers a flexible framework for capturing bottleneck and labor-market effects. Our analysis suggests that the costs of a prolonged closure could be much greater than indicated by input–output studies. We find that cutting all imports by 95% in an environment of sticky real wages would reduce GDP by 48%. However, if bottleneck imports (mainly oil) were exempt and workers accepted real wage cuts then the GDP reduction would be only 11%.