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How strong is co-movement in employment over the business cycle? Evidence from state/industry data

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  • Gerald A. Carlino
  • Robert H. DeFina

Abstract

This study measures the extent of co-movement in employment across states and industries at business-cycle frequencies. The strength of co-movement is quantified using the bi-variate and multi-variate measures of cohesion developed in Crous, Forni, and Reichlin (2001). The data indicate that cohesion is generally positive for the state/industry pairs, although the distribution masses around a relatively low value. The results suggest that cohesion has risen over time and that cohesion increases with spatial aggregation. Evidence is presented revealing that the measured degree of co-movement is sensitive to the chosen periodicity of the data and that there is much greater cohesion across states for a given industry than across different industries within a state. An investigation into the sources of cross-state variation in cohesion reveals that important determinants include the strength of input-output linkages within each state, the different effects of monetary policy actions on each state's employment, and the degree of industrial diversity within a state. No state-level support is found for Shea's (1996) hypothesis that industries that locate together co-move to a greater extent than do those that are more spatially diffused.

Suggested Citation

  • Gerald A. Carlino & Robert H. DeFina, 2003. "How strong is co-movement in employment over the business cycle? Evidence from state/industry data," Working Papers 03-5, Federal Reserve Bank of Philadelphia.
  • Handle: RePEc:fip:fedpwp:03-5
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    Cited by:

    1. Rachidi Kotchoni & Dalibor Stevanovic & Stéphane Surprenant, 2019. "Identification des points de retournement du cycle économique au Canada," CIRANO Project Reports 2019rp-05, CIRANO.

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    Keywords

    Employment (Economic theory);

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