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International trade, technological shocks and spillovers in the labour market: a GVAR analysis of the US manufacturing sector

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  • P. Hiebert
  • I. Vansteenkiste

Abstract

We empirically analyse the response of labour market related variables in the US manufacturing sector to various shocks, notably to trade openness and technology, as well as examining spillovers from industry-specific labour market shocks. The econometric approach involves an application of the recently developed Global Vector Autoregression methodology of Dees et al. (2007) to 12 manufacturing industries over the period 1977-2003. The framework allows us to analyse the response of a standard set of labour-market related variables (employment, real compensation, productivity and capital stock) to exogenous factors (a sector-specific measure of trade openness, a common technology and oil price shock), along with industry spillovers using specific measures of manufacturing-wide variables for each sector. Generalized impulse responses indicate that increased trade openness negatively affects real compensation, has negligible employment effects and leads to higher labour productivity. These impacts, however, are relatively weaker than those induced by technology shocks, with the latter positively and significantly affecting both real compensation and employment. There is also evidence of positive spillovers across industries from sector-specific employment and productivity shocks. Impact elasticities suggest strong intra-sectoral linkages for employment and capital stock formation, contrasting with weak linkages for what concerns real compensation and productivity.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 42 (2010)
Issue (Month): 24 ()
Pages: 3045-3066

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Handle: RePEc:taf:applec:v:42:y:2010:i:24:p:3045-3066

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Cited by:
  1. Neil R. Ericsson & Erica L. Reisman, 2012. "Evaluating a global vector autoregression for forecasting," International Finance Discussion Papers 1056, Board of Governors of the Federal Reserve System (U.S.).
  2. Adam Traczyk, 2013. "Financial integration and the term structure of interest rates," Empirical Economics, Springer, vol. 45(3), pages 1267-1305, December.
  3. Alexander Chudik & Hashem Pesaran, 2014. "Theory and Practice of GVAR Modeling," Cambridge Working Papers in Economics 1408, Faculty of Economics, University of Cambridge.
  4. Yan Sun & Frigyes F Heinz & Giang Ho, 2013. "Cross-Country Linkages in Europe," IMF Working Papers 13/194, International Monetary Fund.
  5. Carlo A. Favero, 2012. "Modelling and Forecasting Yield Differentials in the euro area. A non-linear Global VAR model," Working Papers 431, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  6. TengTeng Xu, 2012. "The Role of Credit in International Business Cycles," Working Papers 12-36, Bank of Canada.
  7. Robert Anderton & Paul Hiebert, . "The Impact of Globalisation on the Euro Area Macroeconomy," Discussion Papers 09/14, University of Nottingham, GEP.
  8. Chudik, Alexander & Pesaran, M. Hashem, 2014. "Theory and practice of GVAR modeling," Globalization and Monetary Policy Institute Working Paper 180, Federal Reserve Bank of Dallas.
  9. Balasan, Andrei-Cristian, 2012. "Literature review concerning the relationship between globalization and regionalization in the world economy," MPRA Paper 39746, University Library of Munich, Germany.
  10. Allegret, Jean-Pierre & Sallenave, Audrey, 2014. "The impact of real exchange rates adjustments on global imbalances: A multilateral approach," Economic Modelling, Elsevier, vol. 37(C), pages 149-163.

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