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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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  • Hiebert, Paul
  • Vansteenkiste, Isabel

Abstract

We empirically analyse the response of US manufacturing labour market variables to various shocks, notably to trade openness and technology. The econometric approach involves an application of the recently developed global VAR (GVAR) methodology of D¶ees, DiMauro, Pesaran, and Smith (2005) to 12 manufacturing industries over the period 1977-2003. This frame-work allows for an assessment of both shocks to weakly exogenous variables and intra-industry spillovers. In this vein, beyond a standard set of labour-market related variables (employment, real compensation, productivity and capital stock) and exogenous factors (a sector-specific measure of trade openness, along with common technology and oil price shocks), specific measures of manufacturing-wide variables are included for each sector. Generalised 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 those induced by technology shocks, with the latter positively and significantly affecting both real compensation and employment. There is also evidence of positive spill-overs 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. JEL Classification: F16, J01, O33

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Paper provided by European Central Bank in its series Working Paper Series with number 0731.

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Date of creation: Feb 2007
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Handle: RePEc:ecb:ecbwps:20070731

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Keywords: Global VAR (GVAR); impulse responses; labour market; Technological Change; Trade;

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Cited by:
  1. 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.
  2. Yan Sun & Frigyes F Heinz & Giang Ho, 2013. "Cross-Country Linkages in Europe," IMF Working Papers 13/194, International Monetary Fund.
  3. Robert Anderton & Paul Hiebert, . "The Impact of Globalisation on the Euro Area Macroeconomy," Discussion Papers 09/14, University of Nottingham, GEP.
  4. TengTeng Xu, 2012. "The Role of Credit in International Business Cycles," Working Papers 12-36, Bank of Canada.
  5. 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.
  6. Neil R. Ericsson & Erica L. Reisman, 2012. "Evaluating a Global Vector Autoregression for Forecasting," Working Papers 2012-006, The George Washington University, Department of Economics, Research Program on Forecasting.
  7. 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.
  8. 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.

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