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Sectoral shocks and metropolitan employment growth

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

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

Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 00-9.

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Date of creation: 2000
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Handle: RePEc:fip:fedpwp:00-9

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Keywords: Employment (Economic theory);

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  1. Katharine G. Abraham & Lawrence F. Katz, 1987. "Cyclical Unemployment: Sectoral Shifts or Aggregate Disturbances?," NBER Working Papers 1410, National Bureau of Economic Research, Inc.
  2. 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.
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Citations

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Cited by:
  1. Campolieti, Michele & Gefang, Deborah & Koop, Gary, 2014. "A new look at variation in employment growth in Canada: The role of industry, provincial, national and external factors," Journal of Economic Dynamics and Control, Elsevier, vol. 41(C), pages 257-275.
  2. 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.
  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. 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.
  5. 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.
  6. 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.
  7. 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.
  8. Michael Fratantoni & Scott Schuh, 2000. "Monetary policy, housing investment, and heterogeneous regional markets," Working Papers 00-1, Federal Reserve Bank of Boston.
  9. 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.

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