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,
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economically,
spillover,
region,
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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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