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The Incidence of Local Labor Demand Shocks

Year: 2011

Type: report

Abstract: Low-skill workers are comparatively immobile: when labor demand slumps in a city, low-skill workers are disproportionately likely to remain to face declining wages and employment.This paper estimates the extent to which (falling) housing prices and (rising) social transfers can account for this fact using a spatial equilibrium model.Nonlinear reduced form estimates of the model using U.S. Census data document that positive labor demand shocks increase population more than negative shocks reduce population, this asymmetry is larger for low-skill workers, and such an asymmetry is absent for wages, housing values, and rental prices.GMM estimates of the full model suggest that the comparative immobility of low-skill workers is not due to higher mobility costs per se, but rather a lower incidence of adverse labor demand shocks.

Source: National Bureau of Economic Research

DOI: 10.3386/w17167

Author: Matthew Notowidigdo

Institution: University of Chicago

Language: English

Topic: Labor market dynamics and wage inequality

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Decent work and economic growth, Reduced inequalities, Sustainable cities and communities, No poverty

Open Access status: green

Funder: National Institute on Aging