Factor Demand Linkages, Technology Shocks, and the Business Cycle

Sean Holly and Ivan Petrella

The Review of Economics and Statistics, 2012, vol. 94, issue 4, 948-963

Abstract: This paper argues that factor demand linkages can be important for the transmission of both sectoral and aggregate shocks. We show this using a panel of highly disaggregated manufacturing sectors together with sectoral structural VARs. When sectoral interactions are explicitly accounted for, a contemporaneous technology shock to all manufacturing sectors implies a positive response in both output and hours at the aggregate level. Otherwise there is a negative correlation, as in much of the existing literature. Furthermore, we find that technology shocks are important drivers of the business cycle. © 2012 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Keywords: factor demand linkages; technology shocks; business cycles; manufacturing (search for similar items in EconPapers)
JEL-codes: C31 E20 E24 E32 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (42)

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Related works:
Working Paper: Factor Demand Linkages, Technology Shocks and the Business Cycle (2010)
Working Paper: Factor demand linkages, technology shocks and the business cycle (2010)
Working Paper: Factor Demand Linkages, Technology Shocks and the Business Cycle (2009)
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