Modeling structural change in the United States textile industry

The U.S. textile mill sector has undergone significant changes over the last forty years, including a steady decline in the relative scale of domestic production, employment reduction, and increased competition from imported products. The principal objectives of this study are to provide economic reasoning as to how and why the changes have happened with empirical evidence.;This study utilizes the translog demand system to evaluate structural change and factor demand relationships in the textile mill sector. The factor demand relationships in the textile mill sector have gone through significant structural change due to technological change. Technological change is also known as the capital deepening process in the U.S. textile industry. The new technology has been labor-saving and capital-using. In addition, capital quasifixity in the short run seems to have reinforced the substitutability between capital and labor. Significant shift in the demand for materials is characterized by substantial movement in the market share from natural fibers towards synthetic fibers. Further decomposition analysis on materials supports the hypotheses that technological change is in favor of the use of rayon and polyester and capital, rayon and polyester are complements in the production of textile mill products. The textile mill sector is closely related to the apparel sector. Factor demand relationshlps in apparel production have also undergone structural change due to rising imports and intense competition. A cost function approach has been applied to modeling import demand in the aggregated textile and apparel sector. The results suggest that imports are strong substitutes for other inputs in the textile and apparel production. Given the competitive pressure of foreign producers who rely on advantageous labor cost, the U.S. textile mills have introduced labor-saving technology and capital- intensive operations. The Multi Fiber Arrangement (MFA) was brought about by increasing imports and it was phased out as a result of intense foreign competition. Due to the characteristics of apparel production, forms of protection intended under the MFA are likely lo be ineffective in protecting these industries.