Sectoral Shocks and Metropolitan Employment Growth

In this paper, we study the sources of industry employment growth in each of five metropolitan statistical areas (MSAs). The objective is to understand the relative importance of aggregate disturbances versus local sectoral shocks in generating observed employment fluctuations at the MSA level. The...

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Bibliographic Details
Published in:Journal of urban economics 2001-11, Vol.50 (3), p.396-417
Main Authors: Carlino, Gerald A., DeFina, Robert H., Sill, Keith
Format: Article
Language:English
Subjects:
aggregate and sectoral shocks
Economics
Empirical research
Employment
Estimation
Metropolitan areas
metropolitan employment growth
Time series
time series models
Urban economics
Urban studies
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Summary:In this paper, we study the sources of industry employment growth in each of five metropolitan statistical areas (MSAs). The objective is to understand the relative importance of aggregate disturbances versus local sectoral shocks in generating observed employment fluctuations at the MSA level. The empirical evidence presented in this paper derives from structural vector autoregressions (SVARs), estimated for each of the five MSAs. Estimations use monthly employment data covering nine one-digit industrial categories for the period 1951:1–1999:8, as well as two variables that capture the influences of aggregate (i.e., national) shocks on MSAs. We find that within-MSA industry shocks explain considerably more of the forecast error variance in industry employment growth than do aggregate shocks. Sectoral shocks account for between 87 and 94% of the 36-month-ahead forecast error variance. Among individual local sectors, shocks to MSA-specific government, manufacturing, and service sector employment growth are the predominate sources of variability.
ISSN:0094-1190
1095-9068
DOI:10.1006/juec.2001.2225