NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Federico Esposito

Department of Economics
Tufts University
8 Upper Campus Road
Medford, MA 02155
USA

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Tufts University

NBER Working Papers and Publications

February 2019Spatial Linkages, Global Shocks, and Local Labor Markets: Theory and Evidence
with Rodrigo Adão, Costas Arkolakis: w25544
Abstract How do shocks to economic fundamentals in the world economy affect local labor markets? In a framework with a flexible structure of spatial linkages, we characterize the model-consistent shock exposure of a local market as the exogenous shift in its production revenues and consumption costs. In general equilibrium, labor outcomes in any market respond directly to the market’s own shock exposure, and indirectly to other markets shocks exposures. We show how spatial linkages control the size and the heterogeneity of these indirect effects. We then develop a new estimation methodology – the Model-implied Optimal IV (MOIV) – that exploits quasi-experimental variation in economic shocks to estimate spatial linkages and evaluate their counterfactual implications. Applying our methodolog...
 
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