NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Juan Ospina

University of Chicago

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NBER Working Papers and Publications

February 2016The Aggregate Implications of Regional Business Cycles
with Martin Beraja, Erik Hurst: w21956
We argue that it is difficult to make inferences about the drivers of aggregate business cycles using regional variation alone because (i) the local and aggregate elasticities to the same type of shock are quantitatively different and (ii) purely aggregate shocks are differenced out when using cross-region variation. We highlight the importance of these confounding factors by contrasting the behavior of U.S. aggregate time-series and cross-state patterns during the Great Recession. In particular, using household and scanner data for the US, we document a strong relationship across states between local employment growth and local nominal and real wage growth. These relationships are much weaker in US aggregates. In order to identify the shocks driving aggregate (and regional) business cycl...
 
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