General Equilibrium Effects in Space: Theory and Measurement /
Adão, Rodrigo.
General Equilibrium Effects in Space: Theory and Measurement / Rodrigo Adão, Costas Arkolakis, Federico Esposito. - Cambridge, Mass. National Bureau of Economic Research 2019. - 1 online resource: illustrations (black and white); - NBER working paper series no. w25544 . - Working Paper Series (National Bureau of Economic Research) no. w25544. .
February 2019.
How do international trade shocks affect spatially connected regional markets? We answer this question by extending shift-share empirical specifications to incorporate general equilibrium effects that arise in spatial models. In partial equilibrium, regional shock exposure has a shift-share structure: it is the average shock weighted by regional exposure shares in revenue and consumption. General equilibrium responses of employment and wages in each market are the sum, across all regions, of these shift-share measures times bilateral reduced-form elasticities determined by the economy's spatial links. We use this reduced-form representation of the model to efficiently estimate the bilateral elasticities exploiting exogenous variation in shock exposure across markets. Finally, we study the general equilibrium impact of the "China shock" on U.S. CZs using our model-consistent generalization of the specification in Autor et al. (2013). We find that indirect effects from the shock exposure of other markets reinforce the negative impact of the market's own shock exposure, leading to employment and wage losses that are significantly larger than those reported in the existing literature.
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Mode of access: World Wide Web.
General Equilibrium Effects in Space: Theory and Measurement / Rodrigo Adão, Costas Arkolakis, Federico Esposito. - Cambridge, Mass. National Bureau of Economic Research 2019. - 1 online resource: illustrations (black and white); - NBER working paper series no. w25544 . - Working Paper Series (National Bureau of Economic Research) no. w25544. .
February 2019.
How do international trade shocks affect spatially connected regional markets? We answer this question by extending shift-share empirical specifications to incorporate general equilibrium effects that arise in spatial models. In partial equilibrium, regional shock exposure has a shift-share structure: it is the average shock weighted by regional exposure shares in revenue and consumption. General equilibrium responses of employment and wages in each market are the sum, across all regions, of these shift-share measures times bilateral reduced-form elasticities determined by the economy's spatial links. We use this reduced-form representation of the model to efficiently estimate the bilateral elasticities exploiting exogenous variation in shock exposure across markets. Finally, we study the general equilibrium impact of the "China shock" on U.S. CZs using our model-consistent generalization of the specification in Autor et al. (2013). We find that indirect effects from the shock exposure of other markets reinforce the negative impact of the market's own shock exposure, leading to employment and wage losses that are significantly larger than those reported in the existing literature.
System requirements: Adobe [Acrobat] Reader required for PDF files.
Mode of access: World Wide Web.