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Labor Market Conflict and the Decline of the Rust Belt

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  • Simeon D. Alder
  • David Lagakos
  • Lee Ohanian

Abstract

No region of the United States fared worse over the postwar period than the Rust Belt. This paper analyzes how much of its decline can be accounted for by the persistent labor market conflict that characterized Rust Belt union-management relations. We develop a multisector, multiregion, dynamic general equilibrium model in which labor market conflict leads to strikes, wage premia, lower investment, and lower productivity growth. These lead to shrinking Rust Belt industries and to workers moving out of the Rust Belt. Labor conflict accounts for half of the decline in the region’s share of manufacturing employment. Foreign competition plays a smaller role, and its effects are concentrated after most of the region’s decline had already occurred.

Suggested Citation

  • Simeon D. Alder & David Lagakos & Lee Ohanian, 2023. "Labor Market Conflict and the Decline of the Rust Belt," Journal of Political Economy, University of Chicago Press, vol. 131(10), pages 2780-2824.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/724852
    DOI: 10.1086/724852
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    Cited by:

    1. Gagliardi, Luisa & Moretti, Enrico & Serafinelli, Michel, 2023. "The World's Rust Belts: The Heterogeneous Effects of Deindustrialization on 1,993 Cities in Six Countries," IZA Discussion Papers 16648, Institute of Labor Economics (IZA).
    2. Sezer, Ayse Hazal & Uras, Burak, 2024. "Firms and Unions," Discussion Paper 2024-006, Tilburg University, Center for Economic Research.
    3. Luisa Gagliardi,, "undated". "The World’s Rust Belts: The Heterogeneous Effects of Deindustrialization on 1,993 Cities in Six Countries," RF Berlin - CReAM Discussion Paper Series 2317, Rockwool Foundation Berlin (RF Berlin) - Centre for Research and Analysis of Migration (CReAM).

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