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Propagation and Amplification of Local Productivity Spillovers

August 2022

Working Paper Number:

CES-22-32

Abstract

This paper shows that local productivity spillovers can propagate throughout the economy through the plant-level networks of multi-region firms. Using confidential Census plant-level data, we find that large manufacturing plant openings not only raise the productivity of local plants but also of distant plants hundreds of miles away, which belong to multi-region firms that are exposed to the local productivity spillover through one of their plants. To quantify the significance of plant-level networks for the propagation and amplification of local productivity shocks, we develop and estimate a quantitative spatial model in which plants of multi-region firms are linked through shared knowledge. Counterfactual exercises show that while knowledge sharing through plant-level networks amplifies the aggregate effects of local productivity shocks, it can widen economic disparities between workers and regions in the economy.

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:
production, manufacturing, industrial, firms plants, produce, sector, regional, location, reallocation productivity, area, economically, spillover, region, plants industry, geographically, externality, geography, network

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Census of Manufactures, Annual Survey of Manufactures, Standard Statistical Establishment List, Standard Industrial Classification, Center for Economic Studies, Total Factor Productivity, National Bureau of Economic Research, Cobb-Douglas, Longitudinal Business Database, Census of Manufacturing Firms, New York University, Census Bureau Disclosure Review Board, Disclosure Review Board, Federal Statistical Research Data Center

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