The Transmission of Commodity Price Super-Cycles
NBER Working Paper No. 24560
We examine two key channels through which commodity price super-cycles affect the economy. Higher commodity prices increase domestic demand (wealth channel), disproportionately benefiting nonexporters, and induce wage increases (cost channel) especially among unskilled workers, hurting unskilled-intensive industries. By exploiting regional variation in exposure to commodity price shocks and administrative firm-level data from Brazil, we empirically disentangle these transmission channels. We introduce a dynamic model with heterogeneous firms and workers to further quantify the mechanisms and evaluate welfare. The cost channel explains two-thirds of intersectoral labor reallocation, and the wealth channel explains two-thirds of the labor reallocation between exporters and non-exporters. Labor market frictions lead to persistent unemployment as the boom fades, eroding up to 50% of the accumulated welfare gains.
Document Object Identifier (DOI): 10.3386/w24560