Uncertainty in a Disaggregate Model: a Data Rich Approach using Google Search Queries

This paper estimates the impact of uncertainty shocks in a disaggregate model featuring
state-level unemployment and uncertainty, which is measured using Google search data.
We show that the disaggregate model captures important spillover effects which a model
using aggregate data would overlook resulting in significantly different peak responses
and time dynamic effects. We find the effect of uncertainty shocks on state-level
unemployment is recessionary and heterogeneous. The importance of national factors in
propagating the effect of uncertainty is also heterogeneous across states, and overall
less relevant than state-level factors. These heterogeneous effects are found to be
related to state-specific industry compositions
and the fiscal position.