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Demand-driven propagation : evidence from the great recession

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  • Nguyen,Ha Minh

Abstract

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.

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  • Nguyen,Ha Minh, 2015. "Demand-driven propagation : evidence from the great recession," Policy Research Working Paper Series 7456, The World Bank.
    • Handle: RePEc:wbk:wbrwps:7456
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    1. Ha Nguyen & Shawheen Rezaei & Divya Agarwal, 2022. "The great recession and job loss spillovers: impact of tradable employment shocks on supporting services," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 68(3), pages 789-815, June.
    2. Joya, Omar & Rougier, Eric, 2019. "Do (all) sectoral shocks lead to aggregate volatility? Empirics from a production network perspective," European Economic Review, Elsevier, vol. 113(C), pages 77-107.
    3. Nguyen,Ha Minh & Nguyen,Huong, 2016. "Unemployment and mortality : evidence from the great recession," Policy Research Working Paper Series 7603, The World Bank.

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