We study the impact of intersectoral and interregional trade linkages in propagating disaggregated productivity changes to the rest of the economy. Using U.S. regional and industry data, we obtain the aggregate, regional and sectoral elasticities of measured total factor productivity, GDP, and employment to regional and sectoral productivity changes. We find that the elasticities vary significantly depending on the sectors and regions affected, and are importantly determined by the spatial structure of the economy. We use our calibrated model to perform a variety of counterfactual exercises including several specific studies of the aggregate and disaggregate effects of shocks to productivity and infrastructure. The specific episodes we study include the boom in California’s computer industry, the productivity boom in North Dakota associated with the shale oil boom, the disruptions in New York’s finance and real state industries during the 2008 crisis, as well as the effect of the destruction of infrastructure in Louisiana following hurricane Katrina.

We develop a dynamic trade model with spatially distinct labor markets facing varying exposure to international trade. The model captures the role of labor mobility frictions, goods mobility frictions, geographic factors, and input‐output linkages in determining equilibrium allocations. We show how to solve the equilibrium of the model and take the model to the data without assuming that the economy is at a steady state and without estimating productivities, migration frictions, or trade costs, which can be difficult to identify. We calibrate the model to 22 sectors, 38 countries, and 50 U.S. states. We study how the rise in China's trade for the period 2000 to 2007 impacted U.S. households across more than a thousand U.S. labor markets distinguished by sector and state. We find that the China trade shock resulted in a reduction of about 0.55 million U.S. manufacturing jobs, about 16% of the observed decline in manufacturing employment from 2000 to 2007. The U.S. gains in the aggregate, but due to trade and migration frictions, the welfare and employment effects vary across U.S. labor markets. Estimated transition costs to the new long‐run equilibrium are also heterogeneous and reflect the importance of accounting for labor dynamics.