Demand-Driven Propagation : Evidence from the Great Recession
This paper provides empirical evidence for the Keynesian demand-driven propagation: initial rounds of job losses lead to additional rounds of job losses. The paper shows that U.S. counties with higher pre-existing exposure to tradable industries ex...
| Main Author: | |
|---|---|
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2015
|
| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2015/10/25202680/demand-driven-propagation-evidence-great-recession http://hdl.handle.net/10986/22869 |
| Summary: | This paper provides empirical evidence
for the Keynesian demand-driven propagation: initial rounds
of job losses lead to additional rounds of job losses. The
paper shows that U.S. counties with higher pre-existing
exposure to tradable industries experienced larger job
losses in non-tradable sectors during the Great Recession.
This was arguably because laid-off tradable workers cut
their consumption, which hurts local non-tradable firms. The
finding is not driven by exposure to the construction
sector, by the collapse in house prices, or by credit supply
problems. In addition, the spillover is stronger when the
focus is on the job losses of more income-elastic
non-tradable sectors. |
|---|