## _wp1428 - 0.7 percentage points in the relative ratio of manufacturing to output for a 10 percent

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### I. Introduction
- Manufacturing remains an important part of the U.S. economy, accounting for about three fourths of private R&D investment, more than half of export earnings, and most of the high-wage blue-collar jobs.
- The paper investigates whether a manufacturing renaissance is evident in U.S. macroeconomic data by:
  - examining pre- and post-crisis evolution of production levels for overall U.S. manufacturing and sub-sectors, and the share of U.S. manufacturing in U.S. and global GDP;
  - documenting key structural factors contributing to profitability, in particular declining relative labor and energy costs;
  - exploring whether manufacturing could contribute to U.S. economic growth in the coming decade via relative cost advantages and higher demand from growing shale oil and gas activity;
  - assessing longer-term prospects for manufacturing’s contribution to growth.

### II. Stylized facts on U.S. manufacturing production
- Post-Great Recession rebound:
  - U.S. manufacturing output rebounded strongly after the Great Recession of 2008-09; the Great Recession was the first U.S. recession since the early 1980s to be followed by a significant recovery in the share of manufacturing value added in total U.S. GDP.
  - Nearly 20 percent increase in U.S. manufacturing output between 2009Q2 and 2013Q3.
- Durable vs nondurable performance:
  - Rebound driven almost entirely by higher production of durable goods.
  - Durable goods production surpassed its pre-recession level in 2011Q3.
  - As of 2013Q3, nondurable goods production remained about 10 percent lower than its pre-recession level (and 5 percent above its trough).
  - Compared with recoveries after the 1990 and 2001 recessions, durable goods increase markedly stronger during the ongoing recovery; nondurable goods rebound weaker than after the 1990 and 2001 recessions.
- Subsector concentration:
  - Three of ten subsectors drive the durable rebound: Computer and Electronics, Motor Vehicles, and Machinery.
  - Computer and Electronics exhibited a robust positive trend during the past decade, including through the Great Recession.
  - Many nondurable subsectors continued to decline or showed slow rebound (e.g., Chemicals, Plastics and Rubbers); Petroleum Products recovered to pre-crisis levels.
- International and employment patterns:
  - U.S. share in global manufacturing output stabilized around 20 percent since the Great Recession.
  - China’s share stabilized around similar level after strong increase in previous decade.
  - Rebound patterns across G-7: relatively strong in U.S. and Germany; muted in France and Italy. Correlations between U.S. and comparator countries were high (in excess of 0.8) through mid-2011 and reduced thereafter.
  - Manufacturing employment changes:
    - Employment declined by about 19 percent between start of 2001 recession and end-2007;
    - Declined another 15 percent during the Great Recession;
    - Increased by about 2 percent since recovery started in mid-2009.
  - Post-recession employment growth strongest in durable goods manufacturing (Computers and Electronics, Machinery); nondurable employment remained stagnant.

### III. Drivers of U.S. manufacturing in the short run (panel regressions)
- Candidate drivers:
  - A more competitive real effective exchange rate (REER); U.S. REER has depreciated over the last decade.
  - A decrease in the relative price of labor in the U.S. vis-à-vis emerging markets (favorable changes in unit labor costs, ULC).
  - A significant reduction in domestic energy prices following shale gas technological breakthroughs; U.S. domestic prices are currently about one fourth of those in Asia and Europe.
  - EIA projections: continued increases in shale gas production in the next few decades should keep U.S. energy prices comparatively low, though the favorable price gap with Europe and Asia is expected to gradually diminish after the next few years.
- Panel regression specification (quarterly observations from 2001Q2 to 2013Q1; ULC series ends at 2011Q3):
  - LD(IP)_{t,i} = β1 LD(IP)_{t-1,i} + β2 Spread_{t,i} + β2 LD(REER)_{t,i} + β2 LD(ULC)_{t,i} + β3 RecDummy + μ
    - LD(IP): difference of the logarithm of Industrial Production index in manufacturing for country i and time t.
    - Spread: difference between world average price of natural gas and price in country i (positive denotes a cost advantage in country i).
    - LD(REER): log difference in real effective exchange rates.
    - LD(ULC): log difference of unit labor costs.
    - RecDummy: dummy for the Great Recession.
- Main regression findings:
  - Each of Spread, REER, and ULC is highly statistically significant when included individually, with expected signs:
    - Spread coefficient positive (lower domestic gas price relative to G-7 average correlated with higher manufacturing growth).
    - REER coefficient negative (currency depreciation associated with higher manufacturing growth).
    - ULC coefficient negative (decreasing labor costs associated with higher manufacturing growth).
  - Joint inclusion:
    - Column (4): Spread and REER together — both remain significant.
    - Column (5): All three variables — REER and ULC remain significant; Spread becomes insignificant.
  - Magnitudes indicate ULC dominates the other relationships; labor costs appear a more robust determinant, though interpretation cautious due to small sample and possible ULC data noise.
- Durable vs nondurable split:
  - Positive correlation between Spread and manufacturing growth mainly driven by durable goods.
  - REER and ULC effects larger for durables; coefficients for nondurables are four and six times smaller than for durables, respectively.
  - Robustness checks (more lags, different sub-periods, additional regressors) did not qualitatively alter results.
- Input-Output (I-O) implications of a 10 percent decrease in cost of energy:
  - 10 percent increase in gross operating surplus of Primary Metals sector;
  - 6 percent increase in Printing and Related Activities;
  - 5 percent increase in Paper Products;
  - 4 percent increase in Chemical Products.
- Quantified elasticities/scenarios from the model:
  - A 1 percent decrease in U.S. ULC vis-à-vis other G-7 economies → increase in U.S. industrial production of about 0.8 percent.
  - A 1 percent REER depreciation → boost production by 0.2 percent.
  - If the natural gas price gap between the U.S. and other G-7 economies would double → additional stimulus to manufacturing production equivalent to 1.5 percent.
- Near-term outlook:
  - Given slack in the U.S. labor market, unit labor costs are likely to decline further in the next few years (before recovering), while favorable natural gas cost advantage likely to last for a few more years — both supporting U.S. manufacturing activity.

### IV. The energy boom—demand pull from shale oil and gas
- EIA Annual Energy Outlook 2013 projections:
  - Total domestic production of oil and gas could increase by 10–15 percent through the end of the decade, with upside risk scenarios pointing to increases of 30–50 percent.
  - Tight oil projected to increase by 40–120 percent through 2020.
  - Shale gas production growth projected in the 35–60 percent range.
- I-O analysis of demand ‘pull’:
  - Additional oil and gas industry production would contribute around 0.1–0.3 pp per year to manufacturing growth through end of the decade.
  - Contribution larger for nondurable goods manufacturing (between 0.2 and 0.3 pp per year) due to refined products.
  - Industries benefiting most: chemical products, primary metals, fabricated metal products, and machinery.
  - Several benefiting sectors had not been part of the manufacturing recovery to date, implying a positive development from new demand.

### V. Long-term impact and cross-country evidence
- Development pattern:
  - Manufacturing-to-output ratio increases at early development stages, peaks, then decreases as real per-capita income reaches higher levels.
  - Cross-country data show bimodal distributions for per capita income and manufacturing-to-output ratio:
    - One cluster (mostly emerging/developing economies) around per capita incomes ~20 percent of U.S.; these have manufacturing-to-GDP ratios larger than U.S.
    - Other cluster (mostly developed economies) around per capita incomes ~80 percent of U.S.; these have ratios similar to U.S.
- Panel regression for manufacturing-to-output ratio (relative to U.S.):
  - MR_{t,i} = α + β1 YR_{t,i} + β2 YRSQ_{t,i} + β3 PR_{t,i} + μ
    - MR: ratio of share of manufacturing in output in country i to that of U.S. (nominal).
    - YR: ratio of real per capita income in country i to that of U.S.
    - YRSQ: YR squared.
    - PR: manufacturing deflator (US$ values) in country i to that of U.S. (proxy for relative currency appreciations).
  - Estimated on 20-year rolling periods beginning in 1970 and alternative country groupings (developed, emerging, developing).
- Long-term implications:
  - The manufacturing-to-output ratio relative to the U.S. begins to decrease for countries that reach real per capita incomes between 40 and 70 percent of U.S.
  - Since emerging markets cluster around 20 percent of U.S. per capita income, a decline in their relative manufacturing-to-output ratios due to per capita income convergence seems unlikely in the medium term.
  - Effect of relative currency appreciations (PR) is less robust, but samples including developed and developing countries suggest a negative effect of up to 0.7 percentage points in the relative ratio of manufacturing to output for a 10 percent currency appreciation.

### Key empirical findings (aggregated)
- A 10 percent currency appreciation is associated with a 0.7 percentage points change in the relative ratio of manufacturing to output; effect stronger (and statistically significant) for G-7 countries.
- Results in Table 3 correspond to fixed-effect regressions for 1990–2010. Data source: United Nations Database.
- The model does not establish whether relative-ratio changes occur through numerator, denominator, or both. Past-decade evidence suggests U.S. manufacturing-to-output share and relative price of manufacturing have both stabilized.
- Manufacturing contributed less than 0.2 percentage points to growth per year (on average) during the last decade.
- Historical manufacturing contributions to growth (average per year): 0.7 percentage points in the 1970s, 0.5 percentage points in the 1980s and the 1990s, about 1.3 percentage points in the 1960s, and 1.1 percentage points in the 1950s.

### Manufacturing exports and medium-term GDP contribution (scenarios and estimates)
- If the U.S. share in G-20 manufacturing exports remains constant through the end of the decade at the level observed in 2011, manufacturing could add up to 0.4 percentage points to growth per year through 2020.
- An increase of 1 percentage point in the U.S. share in total G-20 manufacturing exports by 2020 would result in an additional 0.2 percentage points of growth per year.
- A one standard deviation increase in currency appreciation (equivalent to a 25 percent increase in manufacturing prices in comparator countries in US$ terms) through 2020 could add up to about 0.5 percentage points of additional GDP growth in the United States per year.
- Contributions of 0.4, 0.2, and 0.5 percentage points are significant relative to recent past given manufacturing’s recent contribution of less than 0.2 percentage points per year.

### Drivers, dynamics, and constraints
- Emerging market economies projected to continue growing faster than developed economies and to increasingly contribute to global trade (including manufacturing), which will continue to grow faster than world GDP.
- U.S. manufacturing exports more resilient than total manufacturing production: manufacturing share of GDP decreased, but manufacturing exports remained about constant and constitute a larger share of total manufacturing output.
- U.S. manufacturing exports have lost market share over past decades, particularly relative to China and other emerging market economies; Constant Market Share analysis suggests part of the loss is due to U.S. exports being primarily directed towards less dynamic regions.
- COMTRADE data suggest U.S. share of manufacturing exports to the world’s dynamic regions remains low, but has grown significantly during the past decade.
- Product composition effects: external sales of chemical and plastic materials (energy intensive) broadly outperformed other sectors during the past decade. Machinery (electrical and other) and transport equipment account for about 40 percent of exports; their lower-than-average growth masks a reorientation of sales toward more dynamic regions (most notably Emerging Asia) and away from more mature markets.
- A combination of declining production costs—falling natural gas prices and ULC, and some real depreciation of the U.S. dollar—could catalyze new investment in manufacturing.
- Expanding shale oil and gas activity will create new demand for U.S. manufacturing output.
- More attractive input costs vis-à-vis other G-7 economies favor future export performance.

### Policy implications and recommendations
- For manufacturing to have a first-order impact on growth during the next few years, the U.S. will have to diversify its export base toward more dynamic regions (e.g., Advanced and Emerging Asia).
- To keep its share in international markets, the U.S. should diversify its manufacturing exports base to more dynamic regions.
- Sustained contributions from manufacturing to GDP growth assume: the relative price of manufacturing remains stable vis-à-vis the GDP deflator, and the share of manufacturing exports in total manufacturing remains unchanged (model assumptions used in potential-impact calculations).

### Modeling and regression notes
- Fixed-effect regressions cover 1990–2010. Details on non-fixed effect regressions, other time periods, other country groupings, and databases are available from the authors upon request.
- Growth and trade projections used in the analysis are those in World Economic Outlook (2013).
- Assumptions used in calculations: the relative price of manufacturing remains stable vis-à-vis GDP deflator; the share of manufacturing exports in total manufacturing remains unchanged.

*Italic: Source — content unit from _wp1428 - 0.7 percentage points in the relative ratio of manufacturing to output for a 10 percent (IMF PDF chapter/section).*

### 1. Panel Regression Estimates for Total Manufacturing Production .......................................20

### 1. Panel Regression Estimates for Total Manufacturing Production .......................................20

### I. Introduction
- Manufacturing remains an important part of the U.S. economy, accounting for about three fourths of private R&D investment, more than half of export earnings, and most of the high-wage blue-collar jobs.
- The paper investigates whether a manufacturing renaissance is evident in U.S. macroeconomic data by:
  - examining pre- and post-crisis evolution of production levels for overall U.S. manufacturing and sub-sectors, and the share of U.S. manufacturing in U.S. and global GDP;
  - documenting key structural factors contributing to profitability, in particular declining relative labor and energy costs;
  - exploring whether manufacturing could contribute to U.S. economic growth in the coming decade via relative cost advantages and higher demand from growing shale oil and gas activity;
  - assessing longer-term prospects for manufacturing’s contribution to growth.

### II. Stylized facts on U.S. manufacturing production
- Post-Great Recession rebound:
  - U.S. manufacturing output rebounded strongly after the Great Recession of 2008-09; the Great Recession was the first U.S. recession since the early 1980s to be followed by a significant recovery in the share of manufacturing value added in total U.S. GDP.
  - Nearly 20 percent increase in U.S. manufacturing output between 2009Q2 and 2013Q3.
- Durable vs nondurable performance:
  - The rebound has been almost entirely driven by higher production of durable goods.
  - Durable goods production surpassed its pre-recession level in 2011Q3.
  - As of 2013Q3, nondurable goods production remained about 10 percent lower than its pre-recession level (and 5 percent above its trough).
  - Compared with recoveries after the 1990 and 2001 recessions, the increase in durable goods production has been markedly stronger during the ongoing recovery; the rebound in nondurable goods has been weaker than after the 1990 and 2001 recessions.
- Subsector concentration:
  - Three of ten subsectors drive the durable rebound: Computer and Electronics, Motor Vehicles, and Machinery.
  - Computer and Electronics exhibited a robust positive trend during the past decade, including through the Great Recession.
  - Many nondurable subsectors continued to decline or showed slow rebound (e.g., Chemicals, Plastics and Rubbers); Petroleum Products recovered to pre-crisis levels.
- International and employment patterns:
  - U.S. share in global manufacturing output stabilized around 20 percent since the Great Recession.
  - China’s share stabilized around similar level after strong increase in previous decade.
  - Rebound patterns across G-7: relatively strong in U.S. and Germany; muted in France and Italy. Correlations between U.S. and comparator countries were high (in excess of 0.8) through mid-2011 and reduced thereafter.
  - Manufacturing employment declined markedly despite output rebound:
    - Employment declined by about 19 percent between start of 2001 recession and end-2007;
    - Declined another 15 percent during the Great Recession;
    - Increased by about 2 percent since recovery started in mid-2009.
  - Post-recession employment growth strongest in durable goods manufacturing (Computers and Electronics, Machinery); nondurable employment remained stagnant.

### III. Drivers of U.S. manufacturing in the short run
- Candidate drivers highlighted:
  - A more competitive real effective exchange rate (REER); U.S. REER has depreciated over the last decade.
  - A decrease in the relative price of labor in the U.S. vis-à-vis emerging markets (favorable changes in unit labor costs, ULC).
  - A significant reduction in domestic energy prices following shale gas technological breakthroughs; U.S. domestic prices are currently about one fourth of those in Asia and Europe.
  - EIA projections: continued increases in shale gas production in the next few decades should keep U.S. energy prices comparatively low, though the favorable price gap with Europe and Asia is expected to gradually diminish after the next few years.
- Panel regression specification (quarterly observations from 2001Q2 to 2013Q1; ULC series ends at 2011Q3):
  - LD(IP)_{t,i} = β1 LD(IP)_{t-1,i} + β2 Spread_{t,i} + β2 LD(REER)_{t,i} + β2 LD(ULC)_{t,i} + β3 RecDummy + μ
    - LD(IP): difference of the logarithm of Industrial Production index in manufacturing for country i and time t.
    - Spread: difference between world average price of natural gas and price in country i (positive denotes a cost advantage in country i).
    - LD(REER): log difference in real effective exchange rates.
    - LD(ULC): log difference of unit labor costs.
    - RecDummy: dummy for the Great Recession.
- Main regression findings (Table 1 and robustness checks):
  - Each of the three potential determinants (Spread, REER, ULC) is highly statistically significant when included individually, with expected signs:
    - Spread coefficient positive (lower domestic gas price relative to G-7 average correlated with higher manufacturing growth).
    - REER coefficient negative (currency depreciation associated with higher manufacturing growth).
    - ULC coefficient negative (decreasing labor costs associated with higher manufacturing growth).
  - When included together:
    - Column (4): Spread and REER together — both remain significant.
    - Column (5): All three variables — REER and ULC remain significant; Spread becomes insignificant.
  - Magnitudes indicate ULC dominates the other relationships; labor costs appear a more robust determinant, though interpretation cautious due to small sample and possible ULC data noise.
- Durable vs nondurable split (Table 2):
  - Positive correlation between Spread and manufacturing growth mainly driven by durable goods.
  - REER and ULC effects are larger for durables; coefficients for nondurables are four and six times smaller than for durables, respectively.
  - Robustness checks (more lags, different sub-periods, additional regressors) did not qualitatively alter results.
- Input-Output (I-O) table implications:
  - A 10 percent decrease in cost of energy implies:
    - 10 percent increase in gross operating surplus of Primary Metals sector;
    - 6 percent increase in Printing and Related Activities;
    - 5 percent increase in Paper Products;
    - 4 percent increase in Chemical Products.
- Quantified policy-relevant elasticities/scenarios from the model:
  - A 1 percent decrease in U.S. ULC vis-à-vis other G-7 economies → increase in U.S. industrial production of about 0.8 percent.
  - A 1 percent REER depreciation → boost production by 0.2 percent.
  - If the natural gas price gap between the U.S. and other G-7 economies would double → additional stimulus to manufacturing production equivalent to 1.5 percent.
- Near-term outlook:
  - Given slack in the U.S. labor market, unit labor costs are likely to decline further in the next few years (before recovering), while favorable natural gas cost advantage likely to last for a few more years — both supporting U.S. manufacturing activity.

### IV. The energy boom—how much of a pull for U.S. manufacturing?
- EIA Annual Energy Outlook 2013 projections:
  - Total domestic production of oil and gas could increase by 10–15 percent through the end of the decade, with upside risk scenarios pointing to increases of 30–50 percent.
  - Tight oil projected to increase by 40–120 percent through 2020.
  - Shale gas production growth projected in the 35–60 percent range.
- I-O analysis of demand ‘pull’ from energy boom:
  - Additional oil and gas industry production would contribute around 0.1–0.3 pp per year to manufacturing growth through end of the decade.
  - Contribution larger for nondurable goods manufacturing (between 0.2 and 0.3 pp per year) due to refined products.
  - Industries benefiting most: chemical products, primary metals, fabricated metal products, and machinery.
  - Several of these benefiting sectors had not been part of the manufacturing recovery to date, implying a positive development from new demand.

### V. Long-term impact of U.S. manufacturing
- Question: Can a U.S. manufacturing revival make a first-order and sustained difference to growth?
- Cross-country stylized evidence:
  - Development models: manufacturing-to-output ratio increases at early development stages, peaks, then decreases as real per-capita income reaches higher levels.
  - Cross-country data show bimodal distributions for per capita income and manufacturing-to-output ratio:
    - One cluster (mostly emerging/developing economies) around per capita incomes ~20 percent of U.S.; these have manufacturing-to-GDP ratios larger than U.S.
    - Other cluster (mostly developed economies) around per capita incomes ~80 percent of U.S.; these have ratios similar to U.S.
- Panel regression for manufacturing-to-output ratio (relative to U.S.):
  - MR_{t,i} = α + β1 YR_{t,i} + β2 YRSQ_{t,i} + β3 PR_{t,i} + μ
    - MR: ratio of share of manufacturing in output in country i to that of U.S. (nominal).
    - YR: ratio of real per capita income in country i to that of U.S.
    - YRSQ: YR squared.
    - PR: manufacturing deflator (US$ values) in country i to that of U.S. (proxy for relative currency appreciations).
  - Estimated on 20-year rolling periods beginning in 1970 and alternative country groupings (developed, emerging, developing).
- Long-term implications from estimates:
  - The manufacturing-to-output ratio relative to the U.S. begins to decrease for countries that reach real per capita incomes between 40 and 70 percent of U.S. (i.e., quadratic term offsets linear term).
  - Since emerging markets cluster around 20 percent of U.S. per capita income, a decline in their relative manufacturing-to-output ratios due to per capita income convergence seems unlikely in the medium term (might occur in longer term).
  - Effect of relative currency appreciations (PR) is less robust, but samples including developed and developing countries suggest a negative effect of up to (text truncated in source).

*Source: Excerpt from IMF working paper (Panel regressions, stylized facts, I-O analysis, and long-term cross-country regressions on U.S. manufacturing recovery and prospects).*

### 0.7 percentage points in the relative ratio of manufacturing to output for a 10 percent

### _wp1428 - 0.7 percentage points in the relative ratio of manufacturing to output for a 10 percent

### Key empirical findings
- A 10 percent currency appreciation is associated with a 0.7 percentage points change in the relative ratio of manufacturing to output; this effect is much stronger (and statistically significant) for G-7 countries (Table 3).
- Results reported in Table 3 correspond to fixed-effect regressions for 1990–2010. The source for the data is the United Nations Database.
- 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.
- Manufacturing contributed less than 0.2 percentage points to growth per year (on average) during the last decade.
- Historical manufacturing contributions to growth (average per year): 0.7 percentage points in the 1970s, 0.5 percentage points in the 1980s and the 1990s, about 1.3 percentage points in the 1960s, and 1.1 percentage points in the 1950s.

### Manufacturing exports and medium-term GDP contribution (scenarios and estimates)
- If the U.S. share in G-20 manufacturing exports remains constant through the end of the decade at the level observed in 2011, manufacturing could add up to 0.4 percentage points to growth per year through 2020.
- An increase of 1 percentage point in the U.S. share in total G-20 manufacturing exports by 2020 would result in an additional 0.2 percentage points of growth per year.
- A one standard deviation increase in currency appreciation (equivalent to a 25 percent increase in manufacturing prices in comparator countries in US$ terms) through 2020 could add up to about 0.5 percentage points of additional GDP growth in the United States per year.
- Contributions to growth of magnitudes above (0.4, 0.2, 0.5 percentage points) are significant relative to the recent past, given manufacturing’s recent contribution of less than 0.2 percentage points per year.

### Drivers, dynamics, and constraints
- Emerging market economies are projected to continue growing at faster rates than developed economies and to increasingly contribute to global trade (including of manufacturing goods), which will continue to grow faster than world GDP.
- U.S. manufacturing exports have been more resilient than total manufacturing production: while manufacturing has decreased as a share of GDP, manufacturing exports have remained about constant and constitute a larger share of total manufacturing output.
- Despite resilience, U.S. manufacturing exports have lost market share during the past few decades, particularly with respect to China and other emerging market economies. A Constant Market Share analysis suggests loss in market share is in part explained by U.S. exports being primarily directed towards less dynamic regions.
- COMTRADE (United Nations) data suggest the share of U.S. manufacturing exports to the world’s dynamic regions remains low, but has grown significantly during the past decade.
- Product composition effects: external sales of chemical and plastic materials (energy intensive) have broadly outperformed other sectors during the past decade. Machinery (electrical and other) and transport equipment account for about 40 percent of exports; their lower-than-average growth masks a reorientation of sales toward more dynamic regions (most notably Emerging Asia) and away from more mature markets.
- A combination of declining production costs—falling natural gas prices and ULC, and some real depreciation of the U.S. dollar—could catalyze new investment in manufacturing.
- Expanding shale oil and gas activity will create new demand for U.S. manufacturing output.
- The more attractive input costs vis-à-vis other G-7 economies (as pointed out in Section III) favor future export performance.

### Policy implications and recommendations
- For manufacturing to have a first-order impact on growth during the next few years, the U.S. will have to diversify its export base toward more dynamic regions (e.g., Advanced and Emerging Asia).
- To keep its share in international markets, the U.S. should diversify its manufacturing exports base to more dynamic regions.
- Sustained contributions from manufacturing to GDP growth assume: the relative price of manufacturing remains stable vis-à-vis the GDP deflator, and the share of manufacturing exports in total manufacturing remains unchanged (model assumptions used in potential-impact calculations).

### Modeling and regression notes
- Fixed-effect regressions cover 1990–2010. Details on non-fixed effect regressions, other time periods, other country groupings, and databases are available from the authors upon request.
- Growth and trade projections used in the analysis are those in World Economic Outlook (2013).
- Assumptions used in calculations: the relative price of manufacturing remains stable vis-à-vis GDP deflator; the share of manufacturing exports in total manufacturing remains unchanged.

*Italic: Source — content unit from _wp1428 - 0.7 percentage points in the relative ratio of manufacturing to output for a 10 percent (IMF PDF chapter/section).*

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