Locate Your Nearest Exit: Mass Layoffs and Local Labor Market Response

Abstract

Large shocks to local labor markets can cause long-lasting changes to employment, unemployment, and the local labor force. This study examines the relationship between mass layoffs and the long-run size of the local labor force. The authors consider four main channels through which the local labor force may adjust: in-migration, out-migration, retirement, and disability insurance enrollment. These channels, primarily out-migration, account for more than half of the labor force reduction over the past two decades. Findings show, however, that during and after the Great Recession, instead of out-migration, non-participation in the labor force grew to account for most of the local labor force exits following a mass layoff.