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Competitive Pressure and the Decline of the Rust Belt: A Macroeconomic Analysis

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Listed author(s):
  • Simeon Alder
  • David Lagakos
  • Lee Ohanian

Abstract

No region of the United States fared worse over the postwar period than the "Rust Belt," the heavy manufacturing region bordering the Great Lakes. This paper hypothesizes that the Rust Belt declined in large part due to a lack of competitive pressure in its labor and output markets. We formalize this thesis in a two-region dynamic general equilibrium model, in which productivity growth and regional employment shares are determined by the extent of competition. Quantitatively, the model accounts for much of the large secular decline in the Rust Belt's employment share before the 1980s, and the relative stabilization of the Rust Belt since then, as competitive pressure increased.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 20538.

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Date of creation: Oct 2014
Handle: RePEc:nbr:nberwo:20538
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Find related papers by JEL classification:

  • E0 - Macroeconomics and Monetary Economics - - General
  • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
  • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Competitive Pressure and the Decline of the Rust Belt: A Macroeconomic Analysis
    by Christian Zimmermann in NEP-DGE blog on 2014-12-09 15:26:56
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:

  1. Ohanian, Lee E., 2014. "Competition and the Decline of the Rust Belt," Economic Policy Paper 14-6, Federal Reserve Bank of Minneapolis.
  2. Benjamin Bridgman, 2014. "Is Labor's Loss Capital's Gain? Gross versus Net Labor Shares," BEA Working Papers 0114, Bureau of Economic Analysis.
  3. Aney, Madhav S. & Ghatak, Maitreesh & Morelli, Massimo, 2016. "Credit market frictions and political failure," Journal of Monetary Economics, Elsevier, vol. 81(C), pages 48-64.

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