State Exports and the Asian Crisis

The Asian financial crisis caused a decline in most states' exports of manufactured goods to East Asia during 1998, but the severity of the decline varied across states. In this article, the authors estimate the size of this export shock for all states. Primarily because western states tend to be more dependent on East Asian markets for export sales, they were hit the hardest by the sharp reduction in Asian demand for United States-produced manufactured goods. Of the states in which the decline in exports to East Asia lowered the growth of manufacturing output by more than 1 percent, two-thirds were western states. The export changes caused by the Asian crisis, however, were found to matter little for manufacturing employment growth across states during 1998. Meanwhile, states with a high concentration of manufacturing industries that use petroleum products extensively as an input tended to have larger manufacturing employment increases during 1998 than other states. Consequently, the authors conclude that the oil price declines during late 1997 and 1998, some portion of which can be attributed to the Asian crisis, appear to be more important than the export effects in influencing manufacturing employment across states.