Working Paper: CEPR ID: DP10046
Authors: Lorenzo Caliendo; Fernando Parro; Esteban Rossi-Hansberg; Pierre-Daniel Sarte
Abstract: We study the impact of regional and sectoral productivity changes on the U.S. economy. To that end, we consider an environment that captures the effects of interregional and intersectoral trade in propagating disaggregated productivity changes at the level of a sector in a given U.S. state to the rest of the economy. The quantitative model we develop features pairwise interregional trade across all 50 U.S. states, 26 traded and non-traded industries, labor as a mobile factor, and structures and land as an immobile factor. We allow for sectoral linkages in the form of an intermediate input structure that matches the U.S. input-output matrix. Using data on trade flows by industry between states, as well as other regional and industry data, we obtain the aggregate, regional and sectoral elasticities of measured TFP, GDP, and employment to regional and sectoral productivity changes. We find that such elasticities can vary significantly depending on the sectors and regions affected and are importantly determined by the spatial structure of the US economy.
Keywords: input-output linkages; migration; propagation; trade
JEL Codes: E0; F1; F16; R12; R13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| regional productivity changes (O49) | aggregate output (E10) |
| regional productivity changes (O49) | welfare (I38) |
| productivity increase in Florida (O49) | aggregate GDP elasticity (E10) |
| productivity increase in New York (O49) | aggregate GDP elasticity (E10) |
| regional productivity changes (O49) | overall economic performance (P47) |
| neglecting regional trade (F19) | underestimations of aggregate elasticity of GDP to productivity changes (O40) |
| eliminating regional trade costs (F12) | TFP and GDP gains (F16) |