Intersectoral Vulnerabilities: Assessing the Impact of External Shocks on the U.S. Construction Sector

Abstract

The construction is one of the key contributing sectors in the U.S. economy. For operational purposes, the construction sector uses inputs from other producing sectors. That dependence makes the construction sector vulnerable to shocks in other sectors. This paper has quantified that vulnerability measured in terms of the annual percentage production loss due to shocks in other sectors. As such, this paper has collected 25 years of historical data from the U.S. Bureau of Economic Analysis and used them in an input–output model to derive the intersectoral relationships, which were further used to calculate the impact of exogenous shocks on the construction sector. It has been found that a 1% annual production loss in the (1) finance, insurance, real estate, rental, and leasing sector; (2) government sector; and (3) manufacturing sector will cause an annual production loss of 0.16%, 0.11%, and 0.05% in the construction sector, respectively. These three sectors exert the most significant influence on the construction sector’s annual production. The outcomes of this paper can also be used to measure the cumulative impact of multiple exogenous shocks originating in different sectors, which could ultimately help to make the U.S. construction sector resilient to external shocks.