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The Incidence of Local Labor Demand Shocks

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  • Matthew J. Notowidigdo

Abstract

Low-skill workers are comparatively immobile. This paper estimates the role of housing prices and social transfers in accounting for this fact using a spatial equilibrium model. Reduced-form estimates using US census data show that positive local labor demand shocks increase population more than negative shocks reduce population, that this asymmetry is larger for low-skill workers, and that such an asymmetry is absent for average wages, housing values, and rental prices. Generalized method of moments estimates reveal that the comparative immobility of low-skill workers is due not to higher mobility costs but to a lower incidence of adverse labor demand shocks.

Suggested Citation

  • Matthew J. Notowidigdo, 2020. "The Incidence of Local Labor Demand Shocks," Journal of Labor Economics, University of Chicago Press, vol. 38(3), pages 687-725.
    • Handle: RePEc:ucp:jlabec:doi:10.1086/706048
    DOI: 10.1086/706048
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    More about this item

    JEL classification:

    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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