The Employment Impact of Differences in Dmand and Production

The results are shown in Table 9, where the upper panel shows the employment effect of
alternative consumption mixes expressed as percentage of the employment level sustained by
consumption activities in the US and the lower panel scales to percentages of total employment.
The results are also illustrated in Figure 8 which shows the change to US employment which
would result from the consumption mix of the country on the horizontal axis.

Table 9 provides some evidence in support of the superior job creation ability of the US
consumption mix. Except for the UK, the European economies have a less employment-friendly
pattern of consumption. For instance, if the US had the French consumption mix the
employment generated by consumption would drop by 7.5%; since consumption accounts for
67% of total employment (net of production of government services) US employment would be
around 5% lower, and the US employment to population ratio of 74% would be reduced by 3.9
percentage points. On the German pattern US employment from consumption would fall by
5.3%, total employment by 3.6% and the employment to population ratio by 2.7 percentage
points. Since the gap in employment to population ratio to the US in the mid 1990s is 15
percentage points for France and 10 for Germany, for these countries around one fourth of the
employment gap can be notionally attributed to the different private consumption mixes. The
UK, on the other hand, gains nothing in employment terms from its consumption pattern, and
Spain gains little.

See Table 9

See Figure 8

Reversing the direction of the counterfactual, we now apply the US private consumption mix to
the consumption levels in each European country, retaining their production structures. The
results are shown in Table 10 and illustrated in Figure 9. The estimated employment change is
expressed in the upper panel relative to the level sustained by the country’s own consumption
activities and in the lower panel relative to its total employment. Again the superiority of the US
consumption mix in terms of employment is evident. The US consumption mix would increase
the employment generated by private consumption in each of the European economies by

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