Reconstructing the great recession
This paper evaluates the role of the construction sector in accounting for the performance of the U.S. economy in the last decade. During the Great Recession (2008-09) employment in the construction sector experienced an unprecedented decline that followed the largest expansion in employment since the 1950s. A simple input-output exercise reveals that the contribution of construction to the variations of the macro variables was significant. Despite the small size of the construction sector, its inter- linkages with other sectors in the economy propagate the effect from changes in the demand of residential investment, hence amplifying the effect on the overall economy. The importance of interlinkages is illustrated in a static model and then quantified in a generalized framework that includes xed and residential investment. The model is calibrated to reproduce the boom-bust dynamics of construction employment in the period 2000-10. We nd that construction and its interlinkages account for a large share of the actual changes in aggregate employment and gross domestic product during the expansion and the recession. Through the lens of the standard business cycle accounting, the recession generated in the model, as in the data, is due to the worsening of the labor wedge.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.stlouisfed.org/
More information through EDIRC
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Matthew Chambers & Carlos Garriga & Don E. Schlagenhauf, 2009.
"Accounting For Changes In The Homeownership Rate,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(3), pages 677-726, 08.
- Yoshiro Miwa & Matthew Chambers & Carlos Garriga & Don E. Schlagenhauf, 2004. "Accounting for Changes in the Homeownership Rate," CIRJE F-Series CIRJE-F-312, CIRJE, Faculty of Economics, University of Tokyo.
- Matthew Chambers & Carlos Garriga, 2005. "Accounting for Changes in the Homeownership Rate," Computing in Economics and Finance 2005 304, Society for Computational Economics.
- Matthew Chambers & Carlos Garriga & Don E. Schlagenhauf, 2007. "Accounting for changes in the homeownership rate," Working Paper 2007-21, Federal Reserve Bank of Atlanta.
- Matthew Chambers & Carlos Garriga & Don Schlagenhauf, 2007. "Accounting for changes in the homeownership rate," Working Papers 2007-034, Federal Reserve Bank of St. Louis.
- Morris A. Davis & Jonathan Heathcote, 2004.
"The price and quantity of residential land in the United States,"
Finance and Economics Discussion Series
2004-37, Board of Governors of the Federal Reserve System (U.S.).
- Davis, Morris A. & Heathcote, Jonathan, 2007. "The price and quantity of residential land in the United States," Journal of Monetary Economics, Elsevier, vol. 54(8), pages 2595-2620, November.
- Davis, Morris & Heathcote, Jonathan, 2005. "The Price and Quantity of Residential Land in the United States," CEPR Discussion Papers 5333, C.E.P.R. Discussion Papers.
- Jonathan Heathcote & Morris Davis, 2004. "The Price and Quantity of Residential Land in the United States," 2004 Meeting Papers 32, Society for Economic Dynamics.
- N. Gregory Mankiw & David N. Weil, 1988.
"The Baby Boom, The Baby Bust, and the Housing Market,"
NBER Working Papers
2794, National Bureau of Economic Research, Inc.
- Mankiw, N. Gregory & Weil, David N., 1989. "The baby boom, the baby bust, and the housing market," Regional Science and Urban Economics, Elsevier, vol. 19(2), pages 235-258, May.
- Kiyotaki, Nobuhiro & Michaelides, Alexander & Nikolov, Kalin, 2010.
"Winners and Losers in Housing Markets,"
CEPR Discussion Papers
7953, C.E.P.R. Discussion Papers.
- Song, In Ho, 2010. "House Prices and Consumption," MPRA Paper 27481, University Library of Munich, Germany.
- Michael Keane & Richard Rogerson, 2012. "Micro and Macro Labor Supply Elasticities: A Reassessment of Conventional Wisdom," Journal of Economic Literature, American Economic Association, vol. 50(2), pages 464-76, June.
- Rodolfo E. Manuelli & Adrian Peralta-Alva, 2011. "Sectoral shocks, reallocation frictions, and optimal government spending," Working Papers 2011-017, Federal Reserve Bank of St. Louis.
- Robert F. Martin, 2006.
"The Baby Boom: Predictability in House Prices and Interest Rates,"
2006 Meeting Papers
84, Society for Economic Dynamics.
- Robert F. Martin, 2005. "The baby boom: predictability in house prices and interest rates," International Finance Discussion Papers 847, Board of Governors of the Federal Reserve System (U.S.).
- Black, Fischer, 1995. " Interest Rates as Options," Journal of Finance, American Finance Association, vol. 50(5), pages 1371-76, December.
- Carlos Garriga & Rodolfo E. Manuelli & Adrian Peralta-Alva, 2012. "A model of price swings in the housing market," Working Papers 2012-022, Federal Reserve Bank of St. Louis.
When requesting a correction, please mention this item's handle: RePEc:fip:fedlwp:2013-006. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anna Xiao)
If references are entirely missing, you can add them using this form.