Pierre-Daniel G. Sarte, Esteban Rossi-Hansberg, Fernando Parro and Lorenzo Caliendo
We study the impact of intersectoral and interregional trade linkages in propagating disaggregated productivity changes to the rest of the economy. Using regional and industry data we obtain the aggregate, regional, and sectoral elasticities of measured TFP, GDP, and employment to regional and sectoral productivity changes. We find that the elasticities vary significantly depending on the sectors and regions affected and are importantly determined by the spatial structure of the economy. We use these elasticities to perform a variety of counterfactual exercises including a detailed study of the effects of the boom in the Computers and Electronics industry in California.