Journal Article

The Impact of Regional and Sectoral Productivity Changes on the U.S. Economy

Lorenzo Caliendo, Fernando Parro, Esteban Rossi-Hansberg and Pierre-Daniel Sarte

in The Review of Economic Studies

Volume 85, issue 4, pages 2042-2096
Published in print October 2018 | ISSN: 0034-6527
Published online December 2017 | e-ISSN: 1467-937X | DOI: https://dx.doi.org/10.1093/restud/rdx082
The Impact of Regional and Sectoral Productivity Changes on the U.S. Economy

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  • International Trade
  • Economic Growth and Aggregate Productivity
  • Economywide Country Studies
  • Urban, Rural, and Regional Economics

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Abstract

We study the impact of intersectoral and interregional trade linkages in propagating disaggregated productivity changes to the rest of the economy. Using U.S. regional and industry data, we obtain the aggregate, regional and sectoral elasticities of measured total factor productivity, GDP, and employment to regional and sectoral productivity changes. We find that the elasticities vary significantly depending on the sectors and regions affected, and are importantly determined by the spatial structure of the economy. We use our calibrated model to perform a variety of counterfactual exercises including several specific studies of the aggregate and disaggregate effects of shocks to productivity and infrastructure. The specific episodes we study include the boom in California’s computer industry, the productivity boom in North Dakota associated with the shale oil boom, the disruptions in New York’s finance and real state industries during the 2008 crisis, as well as the effect of the destruction of infrastructure in Louisiana following hurricane Katrina.

Keywords: Regional trade; Input-output linkages; Labour mobility; Spatial economics; Economic geography; Regional productivity; Sectoral productivity; F10; F1; F16; O4; O51; R10; R12; R15

Journal Article.  28295 words.  Illustrated.

Subjects: International Trade ; Economic Growth and Aggregate Productivity ; Economywide Country Studies ; Urban, Rural, and Regional Economics

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