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Dynamic responses to labor demand shocks: Evidence from the financial industry in Delaware

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  • Weinstein, Russell

Abstract

This paper analyzes an important shock to local labor demand in financial services: firm relocation to Delaware following a Supreme Court ruling and state legislation in the 1980s. Using synthetic controls and bordering states, I find large effects on employment, unemployment, and participation in the first decade. Wage effects, and in many cases employment spillovers to the nontradable sector, appear larger than estimates from shocks to the tradable sector. Effects persist for ten to twenty years after Delaware loses its original policy-induced advantage. The shift towards a low unemployment sector explains this persistence, rather than direct productivity effects or agglomeration.

Suggested Citation

  • Weinstein, Russell, 2018. "Dynamic responses to labor demand shocks: Evidence from the financial industry in Delaware," Journal of Urban Economics, Elsevier, vol. 106(C), pages 27-45.
    • Handle: RePEc:eee:juecon:v:106:y:2018:i:c:p:27-45
    DOI: 10.1016/j.jue.2018.05.003
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    Cited by:

    1. Russell Weinstein, 2022. "Local Labor Markets and Human Capital Investments," Journal of Human Resources, University of Wisconsin Press, vol. 57(5), pages 1498-1525.
    2. Yusuf Mercan & Benjamin Schoefer, 2020. "Jobs and Matches: Quits, Replacement Hiring, and Vacancy Chains," American Economic Review: Insights, American Economic Association, vol. 2(1), pages 101-124, March.
    3. Button, Patrick, 2019. "Do tax incentives affect business location and economic development? Evidence from state film incentives," Regional Science and Urban Economics, Elsevier, vol. 77(C), pages 315-339.
    4. Daniel Monte & Roberto Pinheiro, 2021. "Labor market competition over the business cycle," Economic Inquiry, Western Economic Association International, vol. 59(4), pages 1593-1615, October.
    5. Tomaz Cajner & John Coglianese & Joshua Montes, 2021. "The Long-Lived Cyclicality of the Labor Force Participation Rate," Finance and Economics Discussion Series 2021-047, Board of Governors of the Federal Reserve System (U.S.).

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    More about this item

    JEL classification:

    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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