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Holger Mueller on Propagation and Amplification of Local Productivity Spillovers

Nomura Professor of Finance at New York University Leonard N. Stern School of Business.
September 7, 2022
2:50 pm
Civitas Finance Seminar

More from this series
Room 101

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.