Trade competition and migration: Evidence from the quartz crisis

Abstract

Foreign competition and technological change can both present threats to domestic industries, potentially resulting in out-migration from cities and regions where these industries are spatially agglomerated. In this paper, I study the migration effects of one such trade shock: The quartz crisis, which devastated the globally dominant Swiss watch industry in the 1970s. Using a differences-in-differences strategy, I show that this trade shock led to a rapid loss of population in affected areas, and a long-run change in growth patterns. This contrasts with many other studies of large trade shocks, which find little migration response. I highlight three key factors that distinguish this shock from others and may explain the divergence: (1) the crisis negatively impacted a key export industry while generating no offsetting gains, (2) the affected labor markets were highly non-diversified, and (3) the affected workers were highly mobile.