On the heterogeneity of sectoral growth and structural dynamics: Evidence from Austrian manufacturing industries

Abstract

This paper studies the factors driving structural dynamics across Austrian manufacturing industries. Using a SVAR framework we identify sectoral labor productivity and demand shocks that are orthogonal to aggregate shocks. We analyze the sectoral impulse-response patterns and find that the effect of industry labor productivity shocks on industry output growth is quite heterogeneous. We devise a taxonomy that allows us to classify industries according to the effect productivity and demand shocks have on output growth. We also show that productivity shocks are quite heterogeneous not just across industries but also over time, whereas shocks to sectoral demand growth are more systematic. We test the taxonomy in a panel regression and are able to confirm our sector specific findings. Industry demand shocks and aggregate productivity and demand shocks lead always to an increase in industry output and industry employment.