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The paper has benefited from discussions with Tam Bayoumi, Olivier Blanchard, Ben Bridgman, Craig Burnside, Roberto Cardarelli, Thomas Glaessner, Chang-Tai Hsieh, Deniz Igan, Simon Johnson, Gian Maria Milesi-Ferretti, Catherine Pattillo, Dani Rodrik, Nikola Spatafora, Martin Sommer, and Egon Zakrajsek.
This is illustrated by relatively high correlation coefficients (in excess of 0.8) between quarterly growth rates in U.S. manufacturing and those of comparator countries through mid-2011 (with the exception of Japan, which was affected by an earthquake in 2011), and reduced correlation coefficients thereafter (Figure 3). Interestingly, China’s manufacturing output (as measured by Purchasing Managers Index, PMI) seems to broadly lead output changes in U.S. manufacturing through mid-2011, though it seems to stagnate thereafter.
The ULC series ends at 2011Q3.
Further robustness checks (including using more lags of key regressors, using different sub-periods, and including additional regressors) did not qualitatively alter the results.
The gross increase in production (by type of activity) is given by X=T−1 * D, where X is a 65-row vector consisting of the value of inputs used in production, T−1 is the inverse of the transformation matrix (which includes the intermediate input coefficients used by all production sectors), and D is a “shock” vector, with zeros in all lines except in those corresponding to oil and gas extraction and oil and coal products. The latter two were filled alternatively by the projected increase in production in tight oil and shale gas from 2012 to 2020 as included in the EIA reference and high-resource cases corresponding to the 2013 Annual Energy Outlook. Increases in durable and non-durable goods production was converted to value added using the aggregate ratios of value added-to-gross output for 2011.
The source for the data is the United Nations Database. Results reported in Table 3 correspond to fixed-effect regressions for 1990–2010. Details on the results for non-fixed effect regressions, other time periods, and other country groupings, as well as databases, are available from the authors upon request.
The Constant Market Share Analysis is based on the idea that the product and geographical structure of a country’s exports can affect is export growth. It constitutes a common method of analysis in international trade.
The model does not allow establishing to what extent changes in the relative ratio of manufacturing-to-output between two countries will occur through changes in the numerator, the denominator or both. Evidence for the past decade suggests that the U.S. manufacturing-to-output share, as well as the relative price of manufacturing, have both stabilized. Calculations on the potential impact of manufacturing in GDP growth assume that the relative price of manufacturing remains stable vis-à-vis GDP deflator. Moreover, it is assumed that the share of manufacturing exports in total manufacturing remains unchanged.
Growth and trade projections used in the analysis are those in World Economic Outlook (2013).
Manufacturing contributed about 0.7 percentage points (pp) per year to growth in the 1970s, and about 0.5 pp in the 1980s and the 1990s. The contribution to growth was larger in the 1960s (about 1.3 pp/year) and the 1950s (1.1 pp/year), on average.