Sectoral Media Focus and Aggregate Fluctuations

We formalize the editorial role of news media in a multisector economy and show that media can be an independent source of business cycle fluctuations, even when they report accurate information. Public reporting about a subset of sectoral developments that are newsworthy but unrepresentative causes firms across all sectors to hire too much or too little labor. We construct historical measures of US sectoral news coverage and use them to calibrate our model. Time-varying media focus generates demand-like fluctuations that are orthogonal to productivity, even in the absence of non-TFP shocks. Presented with historical sectoral productivity, the model reproduces the 2009 Great Recession. (JEL D22, D83, E32, L82)

The Shifting Structure of the Maltese Economy: Evidence from Chain-Linked Data

The economy of the Maltese islands has undergone significant structural change and diversification since the turn of the century. The aim of this study is to provide an overview of sectoral developments in output, employment, unit labour costs, and prices in Malta during the two decades to 2020. Analysis is conducted using the newly-available chain-linked sectoral national accounts data, which is a departure from previous studies. Furthermore, we complement our findings with a comparative analysis of structural developments in Malta and in the euro area. The results show that the Maltese economy underwent a significant shift towards the services sector between 2000 and 2020. Sectors such as finance & insurance, information & communication, professional, scientific & technical activities, administrative & support services, and arts, entertainment & recreational services saw large increases in their shares of both output and employment. On the other hand, more traditional sectors such as manufacturing, construction, and food & accommodation services saw a decline in their relative importance. An analysis of productivity and cost developments also suggests that services sectors were generally the most productive during the period under study, while recording the highest levels of compensation per employee and the lowest unit labour costs. Nonetheless, sectoral productivity levels in Malta generally remain below those observed in the euro area. Output prices rose significantly in Malta between 2000 and 2020, generally reflecting the higher pace of economic growth when compared with the euro area. Received: 2 May 2021 / Accepted: 15 June 2021 / Published: 8 July 2021

Sectoral Productivity Growth, COVID-19 Shocks, and Infrastructure

This paper examines sectoral productivity shocks of the COVID-19 pandemic, their aggregate impact, and the possible compensatory effects of improving productivity in infrastructure-related sectors. We employ the KLEMS annual dataset for a group of OECD and Latin America and the Caribbean countries, complemented with high-frequency data for 2020. First, we estimate a panel vector autoregression of growth rates in sector level labor productivity to specify the nature and size of sectoral shocks using the historical data. We then run impulse-response simulations of one standard deviation shocks in the sectors that were most affected by COVID 19. We estimate that the pandemic cut economy-wide labor productivity by 4.9 percent in Latin America, and by 3.5 percent for the entire sample. Finally, by modeling the long-run relationship between productivity shocks in the sectors most affected by COVID 19, we find that large productivity improvements in infrastructure--equivalent to at least three times the historical rates of productivity gains--may be needed to fully compensate for the negative productivity losses traceable to COVID 19.

GRAHAM’S THEORY OF INTERNATIONAL VALUES REVISITED: A RICARDIAN TRADE MODEL WITH LINK COMMODITIES

Frank D. Graham (1890–1949) presented an innovative multi-country, multi-commodity trade model that attached great importance to link commodities and quantity adjustments, not perfect specializations and price adjustments as emphasized by John Stuart Mill and Alfred Marshall. However, due to some shortcomings, this model was not sufficiently understood and has been forgotten. This study reconstructs Graham’s theory of international values by rectifying the shortcomings. Through this reconstruction, the following is clarified. First, in multi-country, multi-commodity trade models, the existence of link commodities is general and perfect specializations seldom appear; therefore, quantity adjustments are normally performed in the face of demand shifts. Second, notwithstanding unchanging sectoral productivity at a national level, national wage rates can vary greatly according to the patterns of the international division of labor. Third, while the domestic relative wage rate increases with an increase in a home country’s productivity of link commodities, it does not increase with an increase in the productivity of commodities produced only in the home country.

Graham’s Theory of International Values Revisited: A Ricardian Trade Model with Link Commodities

F. D. Graham (1890–1949) presented an innovative multi-country, multi-commodity trade model that attached great importance to link commodities and quantity adjustments, not perfect specializations and price adjustments as emphasized by J. S. Mill and A. Marshall. However, due of some shortcomings, this model was not sufficiently understood and has been forgotten. This study reconstructs Graham’s theory of international values by rectifying the shortcomings. Through this reconstruction, the following is clarified. First, in multi-country, multi-commodity trade models, the existence of link commodities is general and perfect specializations seldom appear; therefore, quantity adjustments are normally performed in the face of demand shifts. Second, notwithstanding unchanging sectoral productivity at a national level, national wage rates can vary greatly according to the patterns of the international division of labor. Third, while the domestic relative wage rate increases with an increase in a home country’s productivity of link commodities, it does not increase with an increase in the productivity of commodities produced only in the home country.