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What Do We Learn from Cross-Regional Empirical Estimates in Macroeconomics?

In: NBER Macroeconomics Annual 2020, volume 35

Author

Listed:
  • Adam Guren
  • Alisdair McKay
  • Emi Nakamura
  • Jón Steinsson

Abstract

Recent empirical work uses variation across cities or regions to identify the effects of economic shocks of interest to macroeconomists. The interpretation of such estimates is complicated by the fact that they reflect both partial equilibrium and local general equilibrium effects of the shocks. We propose an approach for recovering estimates of partial equilibrium effects from these cross-regional empirical estimates. The basic idea is to divide the cross-regional estimate by an estimate of the local fiscal multiplier, which measures the strength of local general equilibrium amplification. We apply this approach to recent estimates of housing wealth effects based on city-level variation, and derive conditions under which the adjustment is exact. We then evaluate its accuracy in a richer general equilibrium model of consumption and housing. The paper also reconciles the positive cross-sectional correlation between house price growth and construction with the notion that cities with larger price volatility have lower housing supply elasticities using a model in which housing supply elasticities are more dispersed in the long run than in the short run.
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Suggested Citation

  • Adam Guren & Alisdair McKay & Emi Nakamura & Jón Steinsson, 2020. "What Do We Learn from Cross-Regional Empirical Estimates in Macroeconomics?," NBER Chapters, in: NBER Macroeconomics Annual 2020, volume 35, pages 175-223, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:14482
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    1. David Autor & David Dorn & Gordon Hanson, 2021. "On the Persistence of the China Shock," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 52(2 (Fall)), pages 381-476.
    2. Hoyos, Mateo & Coronado, José Alejandro & Martins, Guilherme Klein, 2024. "Local and Spillover Effects of Trade on Structural Transformation: Evidence from Brazil," SocArXiv rfqvt, Center for Open Science.
    3. Michael J Böhm & Terry Gregory & Pamela Qendrai & Christian Siegel, 2021. "Demographic change and regional labour markets," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 37(1), pages 113-131.
    4. Wall, Howard, 2023. "The Great, Greater, and Greatest Recessions of US States," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 53(1), January.
    5. Beuermann, Diether W. & Bottan, Nicolas L. & Hoffmann, Bridget & Jackson, C. Kirabo & Vera-Cossio, Diego, 2024. "Does education prevent job loss during downturns? Evidence from exogenous school assignments and COVID-19 in Barbados," European Economic Review, Elsevier, vol. 162(C).
    6. Burchardi, Konrad & Terry, Stephen & Chaney, Thomas & Tarquinio, Lisa & Hassan, Tarek, 2020. "Immigration, Innovation, and Growth," CEPR Discussion Papers 14719, C.E.P.R. Discussion Papers.
    7. Alisdair McKay & Christian K. Wolf, 2023. "What Can Time‐Series Regressions Tell Us About Policy Counterfactuals?," Econometrica, Econometric Society, vol. 91(5), pages 1695-1725, September.
    8. Hyunseung Oh & Choongryul Yang & Chamna Yoon, 2024. "Land development and frictions to housing supply over the business cycle," Finance and Economics Discussion Series 2024-010, Board of Governors of the Federal Reserve System (U.S.).
    9. Luigi Marattin & Tommaso Nannicini & Francesco Porcelli, 2022. "Revenue vs expenditure based fiscal consolidation: the pass-through from federal cuts to local taxes," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(4), pages 834-872, August.
    10. Fabio Canova, 2024. "Should we trust cross‐sectional multiplier estimates?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 39(4), pages 589-606, June.
    11. Diego Daruich & Julian Kozlowski, 2023. "Macroeconomic Implications of Uniform Pricing," American Economic Journal: Macroeconomics, American Economic Association, vol. 15(3), pages 64-108, July.
    12. Jeremy Majerovitz & Karthik Sastry, 2023. "How Much Should We Trust Regional-Exposure Designs?," Working Papers 2023-018, Federal Reserve Bank of St. Louis.
    13. Quincy, Sarah, 2022. "Income shocks and housing spillovers: Evidence from the World War I Veterans’ Bonus," Journal of Urban Economics, Elsevier, vol. 132(C).
    14. Ozan Güler & Mike Mariathasan & Klaas Mulier & Nejat G. Okatan, 2021. "The real effects of banks' corporate credit supply: A literature review," Economic Inquiry, Western Economic Association International, vol. 59(3), pages 1252-1285, July.
    15. Kieran P. Donaghy, 2021. "Implications for Regional Science of the “Rebuilding Macroeconomic Theory Projectâ€," International Regional Science Review, , vol. 44(3-4), pages 363-384, May.
    16. Timothy G. Conley & Bill Dupor & Rong Li & Yijiang Zhou, 2023. "Decomposing the Government Transfer Multiplier," Working Papers 2023-017, Federal Reserve Bank of St. Louis, revised 17 Nov 2023.
    17. Yui Kishaba & Tatsushi Okuda, 2023. "The Slope of the Phillips Curve for Service Prices in Japan: Regional Panel Data Approach," Bank of Japan Working Paper Series 23-E-8, Bank of Japan.

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    More about this item

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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