RIETI Policy Symposium
Frontier of Inter-firm Network Analysis:
Power of network and geographical friction
Handout
Lorenzo CALIENDO
Associate Professor of Economics, Yale University
March 8, 2016
Research Institute of Economy, Trade and Industry (RIETI)
http://www.rieti.go.jp/en/index.html
Trade, Sectoral Linkages, and Labor Market Dynamics:
Quantitative Implications
Lorenzo Caliendo
Yale University, NBER
RIETI Symposium
Lorenzo Caliendo, Yale University
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Introduction
Fluctuations in aggregate economic activity are the result of a wide
variety of disaggregated changes
I
Sectoral: process or product innovations, industrial/commercial policies
I
Regional: natural disasters or changes in local regulations
I
Sectoral and regional: large corporate bankruptcy or bailout
Lorenzo Caliendo, Yale University
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Introduction
What are the mechanisms through which disaggregated changes
a¤ect the aggregate economy?
I
Sectoral Linkages
I
Geographic factors
I
Inter-regional trade
I
Labor Market Dynamics - Migration
What are the quantitative implications of di¤erent disaggregated
changes?
I
I’ll present di¤erent examples
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What are the mechanisms?
Sectoral Linkages
Firms purchase goods from each other and this forms sectoral linkages
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What are the mechanisms?
Geographic factors
Research on this area has largely abstracted from accounting for the
regional concentration of sectoral activity
I
Does it matter? Yes!
F
Because the distribution of sectors across regions is far from uniform
Concentration across regions (2007)
Petroleum and Coal
Concentration Index
Wood and Paper
0.16
0.14
NI
NI
2229
261
AL
NE
EN
2292
2222
227
EI
2224
AY
2222
AL
22222
TT
OI
2226
IL
429
AO
2279
222
EE
2242
AV
2222
TN
NE
2222
OK
LR
222
2226
2294
NA
2229
2227
2222
LL
AL
SA
2222
222
2229
TX
2227
II
2222
LL
ES
LL
229
222
2929
Lorenzo Caliendo, Yale University
EN
2616
162
EE
EI
2622
AY
NV
2617
2611
AL
OI
166
IL
161
AO
2662
261
NJ
662
169
EE
2666
261
AV
261
261
2667
TN
LZ
0
Quantitative
()
Implications
NE
267
OK
LR
2691
161
166
NA
6
2619
LK
2622
EE
2666
VL
KY
EO
AL
169
IN
2
KS
2667
666
0.02
161
2611
AT
266
IL
2621
TT
RI
NY
761
NE
0.04
EL
2626
262
AI
SE
2666
2627
2222
2292
2226
LZ
LK
NE
2611
IE
0.06
169
VT
ET
1
2222
VL
KY
EO
224
222
222
IN
222
KS
2267
2422
OR
0.08
NJ
AL
IL
NE
NV
0.1
2222
AT
2242
2227
2229
EE
1
2227
RI
NY
2224
Petrol
eum
Comp
and
ute
Textile r and Ele Coal
, Appar
ctro
el, Lea nic
Arts
and
ther
Recre
atio
Chem n
Info
ical
Transp rmation
ortation Servic
Equip es
ment
Real
Financ
Estate
e and
Ins
Miscel urance
laneou
Educa s
tion
Other
Servic
Machi es
Whole
Const nery
sale
ruction
and
Acc
Prima om. and Retail Tra
de
ry and Food
Fabrica Services
ted Me
tal
Food,
Furnitu
Bever
re
age,
Tobacc
Printino
Transp
g
ort Se
rvic
Health es
Nonm
Care
eta
llic Min
Electri
era
cal
Plastic Equipme l
s and
nt
Rubbe
Wood
r
and
Paper
SE
22222
2222
2292
AI
IE
EL
2222
VT
ET
2229
AL
0.12
EE
222
OR
LL
AL
SA
666
669
6
TX
661
II
2626
LL
ES
LL
161
266
266
RIETI Symposium
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What are the mechanisms?
Inter-regional trade
Physical production takes places at di¤erent geographical locations
I
Shipping goods across space is costly
Regional trade much more important than international trade!
U.S. trade as a share of GDP (%, 2007)
Exports Imports Total
International trade
11.9
17.0
28.9
Inter-regional trade
33.4
33.4
66.8
Source: World Development indicators and CFS
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What are the mechanisms?
Labor Market Dynamics - Migration
Some factors of production are …xed to a location
I
for example: land and infrastructures
Labor moves and adjusts after a change in local circumstances
I
More than 6% (aprox 10 million) of the labor force in the U.S. change
sectors and/or states in any given quarter!
Interregional migration is also important in Japan
Net migration rate in the manufacturing sector
Source: Kondo, Okubo (2012)
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Quantifying the economic e¤ects of disaggregated
shocks
Lorenzo Caliendo, Yale University
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How to quantify the economic e¤ects of di¤erent shocks?
Use new developments on the international trade literature to
quantify/identify the e¤ects
I
Building on Eaton and Kortum (2002), Caliendo and Parro (2015)
These new methodologies account for:
I
I
I
Sectoral Linkages
Inter-regional trade
Labor Market Dynamics - Migration
Equally important, these methods also take into account the regional
composition of sectoral activity
Lorenzo Caliendo, Yale University
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Quantitative implications
I’ll present results of studies that quantify the e¤ects of a variety
sectoral/regional changes
1
Productivity boom in Computers and Electronics in California
2
Reduction of internal regional distortions in the U.S.
3
Aggregate e¤ects to the Japanese economy from:
F
F
Commercial policy (NAFTA, Preferential Trade Agreements)
China’s productivity boom (2000-2007)
List of collaborators:
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Parro, Dvorkin, Feenstra, Romalis, Rossi-Hansberg, Sarte, Taylor
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1) Productivity Boom in Computers and Electronics
California, home of prominent information and technology …rms
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Apple, Cisco Systems, Hewlett-Packard, Intel and others
I
In 2007, California had 24% of all employment in Comp. & Elec.
F
Texas 8%, Massachusetts 6%, other states (37) less than 2%
From 2002-07 California experienced a boom in Comp. & Elec.
I
I
An average of 14.6% annual productivity increase in that sector
The largest across all states and regions in the U.S. during that period
We evaluate how the productivity boom in that sector and state
propagated to all other sectors and states of the U.S. economy
Lorenzo Caliendo, Yale University
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1) Productivity Boom in Comp. & Elec. in California
Regional Productivity e¤ects (%)
NH
0.13
WA
ME
0.29
OR
-0.14
MT
ND
0.02
0.01
ID
MN
NV
0.04
CA
0.02
UT
OH
0.02
IL
0.001
CO
0.07
KS
0.08
0.85
-0.01
IN
0.01
MO
OK
AR
0.01
0.03
NJ
0.004
0.01
-0.01
0.02
WV
0.03
TN
AZ
NM
-0.004
-0.02
-0.01
AK
0.03
DE
MD
0.01
-0.01
0.01
-0.03
PA
VA
KY
0
CT
0.003
IA
NE
0.02
0.05
NY
0.02
0.02
MA
RI
0.01
WI
0.05
WY
-0.09
MI
0.02
SD
-0.001
0.002
VT
NC
-0.002
AL
GA
SC
0.002
0.01
0.01
TX
0.02
MS
HI
-0.04
Lorenzo Caliendo, Yale University
Quantitative
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LA
-0.004
0.003
FL
-0.01
RIETI Symposium
12 / 20
1) Productivity Boom in Comp. & Elec. in California
Regional Gross Domestic Product (GDP) e¤ects (%)
NH
-0.39
WA
ME
1.05
OR
-1.53
MT
ND
0.04
-0.21
ID
MN
NV
-0.15
CA
-0.1
UT
OH
-0.03
IL
-0.26
CO
-0.04
KS
-0.13
4.3
-0.02
IN
-0.07
MO
OK
AR
-0.15
0.01
NJ
-0.14
-0.25
-0.03
-0.58
WV
0.15
TN
AZ
NM
-0.91
-1.07
-0.31
AK
0.27
DE
MD
-0.25
0.01
-0.03
-0.46
PA
VA
KY
-0.19
CT
-0.44
IA
NE
-0.87
0.19
NY
-0.002
-0.14
MA
RI
0.05
WI
0.13
WY
-0.91
MI
-0.33
SD
-0.93
-0.13
VT
NC
-0.12
AL
GA
SC
-0.17
0.12
-0.07
TX
-0.23
MS
HI
-0.9
Lorenzo Caliendo, Yale University
Quantitative
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LA
0.01
0.28
FL
-0.73
RIETI Symposium
13 / 20
1) Productivity Boom in Comp. & Elec. in California
Regional Employment e¤ects (%)
NH
-0.61
WA
ME
0.75
OR
-1.96
MT
ND
-0.15
-0.35
ID
MN
NV
-0.36
CA
-0.24
UT
OH
-0.17
IL
-0.42
CO
-0.22
KS
-0.39
3
-0.13
IN
-0.2
MO
OK
AR
-0.3
-0.14
NJ
-0.25
-0.39
-0.16
-0.76
WV
0.05
TN
AZ
NM
-1.24
-1.4
-0.44
AK
0.12
DE
MD
-0.39
-0.1
-0.17
-0.58
PA
VA
KY
-0.3
CT
-0.6
IA
NE
-1.06
0.12
NY
-0.11
-0.37
MA
RI
-0.07
WI
0.03
WY
-0.95
MI
-0.46
SD
-1.2
-0.23
VT
NC
-0.23
AL
GA
SC
-0.3
0.03
-0.21
TX
-0.38
MS
HI
-1.3
Lorenzo Caliendo, Yale University
Quantitative
()
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LA
-0.09
0.24
FL
-0.91
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1) Productivity Boom in Comp. & Elec. in California
We …nd that the boom in the Computers and Electronics industry in
California increased U.S. welfare by 0.2%
I
Twice the gains that the U.S. had from signing the North American
Free Trade Agreement (NAFTA)!
TAKEAWAY: Local shocks can have considerable aggregate e¤ects!
Lorenzo Caliendo, Yale University
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2) Reduction of inter-regional trade distortions in the U.S.
Distortions impede an e¢ cient allocation of resources across …rms
Eliminating distortions across U.S. states
Aggregate Productivity gains
3.62%
Aggregate GDP gains
10.54%
Aggregate Welfare gains
10.10%
TAKEAWAY: Reducing inter-regional trade distortions can have
considerable aggregate e¤ects!
Lorenzo Caliendo, Yale University
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3) Aggregate e¤ects to the Japanese economy
Commercial policy
How did NAFTA a¤ected the Japanese economy?
I
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Example of how a change in commercial policy can a¤ect other
economies
We …nd that Japan’s real income decreased by -0.007%
F
Main reason: trade diversion
Did Japan gained from reducing tari¤s?
I
Example of the e¤ect of Japan’s commercial policy
F
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All Preferential Trade Agreements (PTA) from 1995 to 2010
We …nd that Japan’s real income increased by 4%
Lorenzo Caliendo, Yale University
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3) Aggregate e¤ects to the Japanese economy
E¤ect of China’s productivity boom (2000-2007)
How did China’s growth a¤ected the Japanese economy?
I
We …nd that Japan’s real income increased by 0.035%
I
Main reason: access to cheaper intermediate goods from China
F
Taniguchi (2015) also …nds a positive e¤ect on manufacturing
employment growth at the prefecture level in Japan
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Conclusions
Accounting for Sectoral Linkages, Geographic factors, Inter-regional
trade, and Labor Market Dynamics is quantitatively and economically
meaningful
I
We show this in a series of studies that quantify the e¤ects of a variety
of shocks with and without these channels active
Main …ndings:
I
I
Local shocks can have considerable aggregate e¤ects!
Reducing inter-regional trade distortions can have considerable
aggregate e¤ects!
For the case of Japan
I
I
Gains from signing PTA’s
Gains from China’s productivity boom
More to be done in this area... our only limitation is access to data
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どうもありがとうございます
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