The Transmission of Commodity Price Super-Cycles / Felipe Benguria, Felipe Saffie, Sergio Urzúa.

Format:

Book

Author/Creator:

Benguria, Felipe.

Contributor:

National Bureau of Economic Research.

Saffie, Felipe.

Urzúa, Sergio.

Series:

Working Paper Series (National Bureau of Economic Research) no. w24560.

NBER working paper series no. w24560

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2018.

Summary:

We examine two key channels through which commodity price super-cycles affect the economy: a wealth channel, through which higher commodity prices increase domestic demand, and a cost channel, through which they induce wage increases. By exploiting regional variation in exposure to commodity price shocks and administrative firm-level data from Brazil, we empirically disentangle these transmission channels. We introduce a dynamic, two-region model with heterogeneous firms and workers to further quantify the mechanisms and evaluate welfare. A counterfactual economy in which commodity booms are purely endowment shocks experiences only 45% of the intersectoral labor reallocation between tradables and nontradables, and 40% of the within-tradables labor reallocation between domestic and exported production. Labor market frictions lead to persistent unemployment as the boom fades, and as a result the welfare gains obtained from a commodity super-cycle are 50% lower relative to those which would be obtained under a fully-flexible labor market.

Notes:

Print version record

April 2018.