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The Real Exchange Rate and Employment in U.S. Manufacturing: State and Regional Results

Author

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  • William H. Branson
  • James P. Love

Abstract

In a series of earlier papers we have examined the impact of exchange rate movements on employment and output in the manufacturing sector, disaggregated by industry sector and by production and non-production workers. In this paper we examine the impact of exchange rate movements on manufacturing employment, disaggregated geographically, using census divisions, regions, states and SMSA's as the unit of analysis. Empirical estimates of employment changes are first presented for the four census regions, the nine census divisions, and the fifty states plus the District of Columbia. For the country as a whole, we estimate that movements in the real exchange rate led to the loss of about 1 million manufacturing jobs over this period. We go on to examine in greater detail manufacturing employment in New York State, and report that exchange rate movements had a much larger impact in the areas outside of New York City than in the metropolitan area. This result is consistent with earlier work that found that employment in management or research is not as sensitive to exchange rate movements as employment in production processes. The New York results are followed by an examination of manufacturing employment in five southern states with large rural populations. Some policy makers have expressed a concern that manufacturing employment in rural areas suffered more than in urban areas during the period of the dollar appreciation. We find that within these five states, the impact of the exchange rate on manufacturing employment in the non-SMSA areas was the same or less than was the case for employment within SMSA areas. Finally, we use a multivariate model to explore why manufacturing employment is more sensitive to exchange rate movements in some states than in others. Factors which are associated with greater sensitivity of manufacturing employment to exchange rate movements are: the percent of the population living outside of SMSA areas, the level of production worker wages, and crude oil production. Factors that are associated with less sensitivity of manufacturing employment to exchange rate movements include the percent of the population with 4 years or more of college or per-capita expenditures on public secondary schools.

Suggested Citation

  • William H. Branson & James P. Love, 1987. "The Real Exchange Rate and Employment in U.S. Manufacturing: State and Regional Results," NBER Working Papers 2435, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:2435
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    References listed on IDEAS

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    1. Saxonhouse, Gary R, 1976. "Estimated Parameters as Dependent Variables," American Economic Review, American Economic Association, vol. 66(1), pages 178-183, March.
    2. Beach, Charles M & MacKinnon, James G, 1978. "A Maximum Likelihood Procedure for Regression with Autocorrelated Errors," Econometrica, Econometric Society, vol. 46(1), pages 51-58, January.
    3. William H. Branson, 1986. "The Limits of Monetary Coordination As Exchange Rate Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 17(1), pages 175-194.
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    Cited by:

    1. Dai, Mi & Xu, Jianwei, 2017. "Firm-specific exchange rate shocks and employment adjustment: Evidence from China," Journal of International Economics, Elsevier, vol. 108(C), pages 54-66.
    2. Robin Leichenko & Julie Silva, 2004. "International Trade, Employment and Earnings: Evidence from US Rural Counties," Regional Studies, Taylor & Francis Journals, vol. 38(4), pages 355-374.
    3. Shumskaya Svetlana S., 2013. "Empiric Assessment of Secondary Effects of Influence of the UAH Exchange Rate Upon Indicators of the Labour Market of Ukraine," Business Inform, RESEARCH CENTRE FOR INDUSTRIAL DEVELOPMENT PROBLEMS of NAS (KHARKIV, UKRAINE), Kharkiv National University of Economics, issue 4, pages 303-311.
    4. Hua, Ping, 2007. "Real exchange rate and manufacturing employment in China," China Economic Review, Elsevier, vol. 18(3), pages 335-353.
    5. Gerald Carlino & Richard Voith & Brian Cody, 1994. "The Effects of Exchange Rate and Relative Productivity Changes on US Industrial Output at the State Level," Urban Studies, Urban Studies Journal Limited, vol. 31(2), pages 219-232, March.
    6. Stewart Ngandu, 2009. "The impact of exchange rate movements on employment: the economy-wide effect of a rand appreciation," Development Southern Africa, Taylor & Francis Journals, vol. 26(1), pages 111-129.
    7. Henry, Mark S., 1988. "Southern Farms And Rural Communities: Developing Directions For Economic Development Research And Policy," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 20(01), pages 1-16, July.
    8. Haroon Bhorat & Nan Tian & Mark Ellyne, 2014. "The Real Exchange Rate and Sectoral Employment in South Africa," Working Papers 201404, University of Cape Town, Development Policy Research Unit.
    9. Stewart Ngandu, 2008. "Exchange Rates And Employment," South African Journal of Economics, Economic Society of South Africa, vol. 76(s2), pages 205-221, August.
    10. Ansgar Belke & Ulrich Volz, 2020. "The Yen Exchange Rate and the Hollowing Out of the Japanese Industry," Open Economies Review, Springer, vol. 31(2), pages 371-406, April.
    11. Yalin Liu, 2022. "Exchange rate, industrial linkage, and firm employment," Review of International Economics, Wiley Blackwell, vol. 30(2), pages 401-421, May.

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