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The impact of regional and sectoral productivity changes on the U.S. economy

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  • Pierre-Daniel G. Sarte
  • Esteban Rossi-Hansberg
  • Fernando Parro
  • Lorenzo Caliendo

Abstract

We study the impact of regional and sectoral productivity changes on the U.S. economy. To that end, we consider an environment that captures the effects of interregional and intersectoral trade in propagating disaggregated productivity changes at the level of a sector in a given U.S. state to the rest of the economy. The quantitative model we develop features pairwise interregional trade across all 50 U.S. states, 26 traded and non-traded industries, labor as a mobile factor, and structures and land as an immobile factor. We allow for sectoral linkages in the form of an intermediate input structure that matches the U.S. input-output matrix. Using data on trade flows by industry between states, as well as other regional and industry data, we calibrate the model and carry out a variety of counterfactual experiments that allow us to gauge the impact of regional and sectoral productivity changes. We find that such changes can have dramatically different effects depending on the sectors and regions affected. In extreme cases, increases in productivity can have negative effects on real GDP (although welfare effects remain positive).

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Bibliographic Info

Paper provided by Federal Reserve Bank of Richmond in its series Working Paper with number 13-14.

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Date of creation: 2013
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Handle: RePEc:fip:fedrwp:13-14

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  1. Sam Kortum & John Romalis & Brent Neiman & Jonathan Eaton, 2010. "Trade and the Global Recession," 2010 Meeting Papers 1340, Society for Economic Dynamics.
  2. Davin Chor, 2008. "Unpacking Sources of Comparative Advantage: A Quantitative Approach," Working Papers 13-2008, Singapore Management University, School of Economics.
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Cited by:
  1. Pablo Fajgelbaum & Stephen J. Redding, 2014. "External Integration, Structural Transformation and Economic Development: Evidence From Argentina," CEP Discussion Papers dp1273, Centre for Economic Performance, LSE.
  2. Pablo Fajgelbaum & Stephen J. Redding, 2014. "External Integration, Structural Transformation and Economic Development: Evidence from Argentina 1870-1914," NBER Working Papers 20217, National Bureau of Economic Research, Inc.
  3. repec:clg:wpaper:2013-28 is not listed on IDEAS
  4. Ferdinando Monte, 2014. "Local Transmission of Trade Shocks," Working Papers 2014-001, Human Capital and Economic Opportunity Working Group.
  5. Kondo, Illenin O., 2013. "Trade Reforms, Foreign Competition, and Labor Market Adjustments in the U.S," International Finance Discussion Papers 1095, Board of Governors of the Federal Reserve System (U.S.).

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