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Sectoral Shocks and Metropolitan Employment Growth

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  • Carlino, Gerald A.
  • DeFina, Robert H.
  • Sill, Keith

Abstract

Horvath and Verbrugge (1996) argue that when investigating the sources of aggregate fluctuations, it is important to use the highest frequency data available. Using monthly data for the U.S. economy they show that industry-specific shocks are more important in explaining fluctuations in industrial production than are common aggregate shocks. With the exception of Coulson (1999) studies that examine the issue at the subnational level have used low frequency, spatially aggregated data. The authors examine the relative importance of national disturbances versus local industry shocks for employment fluctuations using monthly data on five metropolitan statistical areas (MSAs). Input-output tables are used to quantify the strength of interindustry linkages, which are then used to help identify a structural VAR model for each MSA. Within-MSA industry shocks are found to explain considerably more of the forecast-error variance in industry employment growth (87-94 percent) than do common national shocks to productivity and monetary policy, and the manufacturing, services, and government sectors make the largest individual contributions to local employment variance. The authors also find that the measured importance of national shocks for employment fluctuations increases as the level of spatial aggregation increases.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 50 (2001)
Issue (Month): 3 (November)
Pages: 396-417

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Handle: RePEc:eee:juecon:v:50:y:2001:i:3:p:396-417

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Web page: http://www.elsevier.com/locate/inca/622905

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References

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  1. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, December.
  2. Joseph G. Altonji & John C. Ham, 1986. "Variation in Employment Growth in Canada: The Role of External, National, Regional and Industrial Factors," NBER Working Papers 1816, National Bureau of Economic Research, Inc.
  3. Eswar Prasad & Tamim Bayoumi, 1996. "Currency Unions, Economic Fluctuations, and Adjustment," IMF Working Papers 96/81, International Monetary Fund.
  4. Runkle, David E, 1987. "Vector Autoregressions and Reality: Reply," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(4), pages 454, October.
  5. John Shea, 1995. "Comovement in Cities," NBER Working Papers 5304, National Bureau of Economic Research, Inc.
  6. David E. Runkle, 1987. "Vector autoregressions and reality," Staff Report 107, Federal Reserve Bank of Minneapolis.
  7. Bernanke, Ben S., 1986. "Alternative explanations of the money-income correlation," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 49-99, January.
  8. Steven J. Davis & Prakash Loungani & Ramamohan Mahidhara, 1997. "Regional labor fluctuations: oil shocks, military spending, and other driving forces," International Finance Discussion Papers 578, Board of Governors of the Federal Reserve System (U.S.).
  9. Katharine G. Abraham & Lawrence F. Katz, 1987. "Cyclical Unemployment: Sectoral Shifts or Aggregate Disturbances?," NBER Working Papers 1410, National Bureau of Economic Research, Inc.
  10. Gerald Carlino & Robert Defina, 1998. "The Differential Regional Effects Of Monetary Policy," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 572-587, November.
  11. Ricardo J. Caballero & Eduardo M.R.A. Engel & John Haltiwanger, 1995. "Aggregate Employment Dynamics: Building From Microeconomic Evidence," NBER Working Papers 5042, National Bureau of Economic Research, Inc.
  12. Lilien, David M, 1982. "Sectoral Shifts and Cyclical Unemployment," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 777-93, August.
  13. Clark, Todd E, 1998. "Employment Fluctuations in U.S. Regions and Industries: The Roles of National, Region-Specific, and Industry-Specific Shocks," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 202-29, January.
  14. Eswar Prasad & Alun Thomas, 1998. "A disaggregated analysis of employment growth fluctuations in Canada," Atlantic Economic Journal, International Atlantic Economic Society, vol. 26(3), pages 274-287, September.
  15. Long, John B, Jr & Plosser, Charles I, 1987. "Sectoral vs. Aggregate Shocks in the Business Cycle," American Economic Review, American Economic Association, vol. 77(2), pages 333-36, May.
  16. Coulson, N. Edward, 1999. "Sectoral sources of metropolitan growth," Regional Science and Urban Economics, Elsevier, vol. 29(6), pages 723-743, November.
  17. Steven J. Davis & John Haltiwanger, 1990. "Gross Job Creation and Destruction: Microeconomic Evidence and Macroeconomic Implications," NBER Chapters, in: NBER Macroeconomics Annual 1990, Volume 5, pages 123-186 National Bureau of Economic Research, Inc.
  18. Tamim Bayoumi & Eswar Prasad, 1997. "Currency Unions, Economic Fluctuations, and Adjustment: Some New Empirical Evidence," IMF Staff Papers, Palgrave Macmillan, vol. 44(1), pages 36-58, March.
  19. Norrbin, Stefan C. & Schlagenhauf, Don E., 1996. "The role of international factors in the business cycle: A multi-country study," Journal of International Economics, Elsevier, vol. 40(1-2), pages 85-104, February.
  20. Todd E. Clark & Kwanho Shin, 1998. "The sources of fluctuations within and across countries," Research Working Paper 98-04, Federal Reserve Bank of Kansas City.
  21. Runkle, David E, 1987. "Vector Autoregressions and Reality," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(4), pages 437-42, October.
  22. Hooker, Mark A & Knetter, Michael M, 1997. "The Effects of Military Spending on Economic Activity: Evidence from State Procurement Spending," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(3), pages 400-421, August.
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Cited by:
  1. M. Bellinzas, 2004. "Dinamiche demografiche, agglomerazione e determinanti economiche. Il caso italiano," Working Paper CRENoS 200407, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  2. Michael Fratantoni & Scott Schuh, 2000. "Monetary policy, housing investment, and heterogeneous regional markets," Working Papers 00-1, Federal Reserve Bank of Boston.
  3. Duranton, Gilles, 2002. "City Size Distributions as a Consequence of the Growth Process," CEPR Discussion Papers 3577, C.E.P.R. Discussion Papers.
  4. Andrea R. Lamorgese, 2008. "Innovation driven sectoral shocks and aggregate city cycles," Temi di discussione (Economic working papers) 667, Bank of Italy, Economic Research and International Relations Area.
  5. Gilles Duranton, 2007. "Urban Evolutions: The Fast, the Slow, and the Still," American Economic Review, American Economic Association, vol. 97(1), pages 197-221, March.
  6. Carlino, Gerald A. & DeFina, Robert H., 2004. "How strong is co-movement in employment over the business cycle? Evidence from state/sector data," Journal of Urban Economics, Elsevier, vol. 55(2), pages 298-315, March.
  7. Michele Campolieti & Deborah Gefang & Gary Koop, 2013. "A New Look at Variation in Employment Growth in Canada: The Role of Industry, Provincial, National and External Factors," Working Papers 26145565, Lancaster University Management School, Economics Department.
  8. Coulson, N. Edward & Liu, Crocker H. & Villupuram, Sriram V., 2013. "Urban economic base as a catalyst for movements in real estate prices," Regional Science and Urban Economics, Elsevier, vol. 43(6), pages 1023-1040.
  9. Gerald A. Carlino, 2003. "A confluence of events? explaining fluctuations in local employment," Business Review, Federal Reserve Bank of Philadelphia, issue Q1, pages 6-12.

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