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Title: The Impact of Regional and Sectoral Productivity Changes on the U.S. Economy

Author(s): Lorenzo Caliendo, Fernando Parro, Esteban Rossi-Hansberg and Pierre-Daniel Sarte

Publication Date: June 2014

Keyword(s): input-output, linkages, migration, propagation and trade

Programme Area(s): International Trade and Regional Economics

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.

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Bibliographic Reference

Caliendo, L, Parro, F, Rossi-Hansberg, E and Sarte, P. 2014. 'The Impact of Regional and Sectoral Productivity Changes on the U.S. Economy'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=10046