Economic crisis, urban structural change and inter-sectoral labour mobility

Abstract

Are recessions drivers of structural change? Here we investigate employment dynamics in the UK and show that a re-allocation of labour between industrial sectors in times of crisis induces an acceleration in structural change. Our key hypothesis is that cities with industrial baskets that exhibit strong potential for inter-industry labour mobility are more resilient as they can shift workers between sectors resulting in employment growth in some sectors — which in turn induces structural change during an economic crisis. Probing this hypothesis, we find that UK cities experienced a sharp increase in the rate of structural change at the city level around 2009 which coincided with an increase in inter-sectoral job transitions during the recession (2008–11) which persisted for years afterwards. To shed light on this, we deploy an econometric model to show that local employment in skill-related sectors, which captures the potential for inter-industry labour mobility, is most strongly associated with city-industry employment growth during the recession period.