| Many manufacturing industries in the United States have been negatively affected by foreign competition in both domestic and foreign markets. Machine tool industry is one of these industries declining in international competitiveness. However, the machine tool industry is identified as "a vital cornerstone of the U.S.'s industrial strength" (Krug, 1982) and of great strategic importance to the processes of economic growth and industrial development and to the nation's comparative international position, both economically and militarily. This study is designed to quantify the production structure, to measure technological change and productivity growth, and to analyze the causes of the decline of the U.S. machine tool industry by designing nine alternative scenarios and measuring the effects of these alternative industrial policies on the demand for two major categories of U.S.-made machine tools: metal cutting (SIC 3541) and metal forming (SIC 3542).; The framework for this study links four-digit models of industry demand and production structure to the Fair macroeconomic model and a neoclassical model of the user cost of capital modified to accommodate disequilibrium in capital input in the key machine tool using manufacturing sectors as well as in machine tool production. Factors whose quantitative impacts are assessed for the 1977-86 period include business cycles, various investment tax credits, corporate income tax rates, personal income tax rates, interest rates, exchange rates, and productivity and technological changes in the domestic and competitive foreign machine tool industries. The prospect for competitiveness of U.S. machine tool industry is then assessed based on the measured effects of these factors and scenarios affecting future production. |
