Local Labor Supply Research Articles

An Application of Difference-in-Difference-Difference Model

Institutional laws and arrangements such as prevailing wage laws influence the employment levels and wage rates of the local labor supply. Conflicting research, however, has shown that prevailing wage laws lead to higher construction costs, while others show little to no relationship. Most of these studies are completed at the national level whose results at the regional level may not be applicable. This article examines the impact of prevailing wage laws on construction wages in the Mountain States of the nation. Difference-in-difference-difference models were used, and results indicate that for the Mountain States, removal of prevailing wage laws decreased wages by 4.4% after 10 years of the repeal. However, because of the available data used in this analysis, the impacts of repealing the prevailing wage laws on benefits could not be determined, which from previous research could be significant.

Investigating the Impact of Economic Structure of Agricultural Products on the Urban-Rural Relationship (Case Study: Central District of Dezful County)

Investigating the Impact of Economic Structure of Agricultural Products on the Urban-Rural Relationship (Case Study: Central District of Dezful County)

Downskilling: changes in employer skill requirements over the business cycle

Using a novel database of 82.5 million online job postings, we show that employer skill requirements fell as the labor market improved from 2010 to 2014. We find that a 1 percentage point reduction in the local unemployment rate is associated with a roughly 0.27 percentage point reduction in the fraction of jobs requiring at least a bachelor's degree and a roughly 0.23 percentage point reduction in the fraction requiring five or more years of experience. This pattern is established using multiple measures of labor availability, is bolstered by similar trends along heretofore un-measured dimensions of skill, and even occurs within firm–job title pairs. We further confirm the causal effect of labor market tightening on skill requirements using a natural experiment based on the fracking boom in the United States, as an exogenous shock to the local labor supply in tradable, non-fracking industries. These industries are not plausibly affected by local demand shocks or natural gas extraction technology, but still show fewer skill requirements in response to tighter labor markets. Our results imply this labor market-induced downskilling reversed much of the cyclical increase in education and experience requirements that occurred during the Great Recession.

Downskilling: Changes in Employer Skill Requirements Over the Business Cycle

Using a novel database of 82.5 million online job postings, we show that employer skill requirements fell as the labor market improved from 2010 to 2014. We find that a 1 percentage point reduction in the local unemployment rate is associated with a roughly 0.27 percentage point reduction in the fraction of jobs requiring at least a bachelor’s degree and a roughly 0.23 percentage point reduction in the fraction requiring five or more years of experience. This pattern is established using multiple measures of labor availability, is bolstered by similar trends along heretofore unmeasured dimensions of skill, and even occurs within firm‐job title pairs. We further confirm the causal effect of labor market tightening on skill requirements using a natural experiment based on the fracking boom in the United States as an exogenous shock to the local labor supply in tradable, non‐fracking industries. These industries are not plausibly affected by local demand shocks or natural gas extraction technology, but still show fewer skill requirements in response to tighter labor markets. Our results imply this labor market‐induced downskilling reversed much of the cyclical increase in education and experience requirements that occurred during the Great Recession.

DOES AGGLOMERATION MATTER EVERYWHERE?: NEW FIRM LOCATION DECISIONS IN RURAL AND URBAN MARKETS*

ABSTRACTWe test whether commonly used measures of agglomeration economies encourage new firm entry in both urban and rural markets. Using new firm location decisions in Iowa and North Carolina, we find that measured agglomeration economies increase the probability of new firm entry in both urban and rural areas. Firms are more likely to locate in markets with an existing cluster of firms in the same industry, with greater concentrations of upstream suppliers or downstream customers, and with a larger proportion of college‐educated workers in the local labor supply. Firms are less likely to enter markets with no incumbent firms in the sector or where production is concentrated in relatively few sectors. The same factors encourage both stand‐alone start‐ups and establishments built by multiplant firms. Commuting decisions exhibit the same pattern as new firm entry with workers commuting from low to high agglomeration markets. Because agglomeration economies are important for rural firm entry also, policies encouraging new firm entry should focus on relatively few job centers rather than encouraging new firm entry in every small town.

Local Labor Supply Responses to Immigration

AbstractHow natives adjust is central to an understanding of the impact of immigration in destination countries. Using detailed labor force data for Malaysia for 1990–2010, we provide estimates of native responses to immigration on multiple extensive margins and rare evidence for a developing country. Instrumental variable estimates show that increased immigration to a state causes substantial internal inward migration, consistent with the fact that immigration increases the demand for native workers. Relocating Malaysian workers are accompanied by their spouses (three‐quarters of whom are housewives) and children who attend school. We find that these effects are concentrated among middle‐ and lower‐skilled Malaysians.

Short‐Term Labour Migration: Brazilian Migrants in Ireland

AbstractShort‐term low‐skilled labour migration has increased internationally during the past two decades of rapid economic growth, in response to deficiencies in local labour supply in developed countries. Ireland was one of the newer states to recruit labour internationally on a large scale from the late 1990s until the global economic downturn in 2008. Various forms of short‐term migration, as well as both documented and undocumented employment, followed. This paper discusses the experience of Brazilian migrants in Ireland who assume particular interest because of being a new migration stream over a great distance, which involved relatively short sojourns in Ireland for many before returning to Brazil. Changing government work permit policies for non‐European Economic Area citizens, European Union enlargement, and economic recession all contributed to reduce the opportunities for legal employment in Ireland. This paper is based on research with workers who were initially recruited for the agricultural processing sector in two small towns in western Ireland through an existing link with the province of Goiás in Brazil. The evidence differs from some other studies of international labour migration in that data collection took place in both Ireland and Brazil. It highlights in particular the vulnerability of short‐term migrants to labour policies and the economy in host countries. Copyright © 2014 John Wiley & Sons, Ltd.

Recent immigrants as labor market arbitrageurs: Evidence from the minimum wage

This paper investigates the local labor supply effects of changes to the minimum wage by examining the response of low-skilled immigrants’ location decisions. Canonical models emphasize the importance of labor mobility when evaluating the employment effects of the minimum wage; yet few studies address this outcome directly. Low-skilled immigrant populations shift toward labor markets with stagnant minimum wages, and this result is robust to a number of alternative interpretations. This mobility provides behavior-based evidence in favor of a non-trivial negative employment effect of the minimum wage. Further, it reduces the estimated demand elasticity using teens; employment losses among native teens are substantially larger in states that have historically attracted few immigrant residents.

Regionalization and Its Effects in Finland – A Regional Age Modelling Analysis

Regional structural change is currently among the greatest challenges facing the public sector in many EU countries. In countries like Finland, where the public sectors have a large role in providing educational, health and social services, structural change rapidly becomes a fiscal problem. Demography is directly linked to the demand for public services and to the potential growth of regional economies. On the one hand, ageing increases the demand for age-related services; on the other, it decreases labour supply, limiting the growth potential of many regions.The state’s main tools for regional policies consist of both direct subsidies to the regions, as well as a mechanism reallocating tax revenues between poor and rich municipalities. However, the welfare costs of funding subsidies to poorer regions may be considerable. Thus, instruments not involving changes in spending have been preferred. Here, we consider the relocation of certain functions of the central government to the periphery – regionalization – as an instrument for coping with regional structural change. An improvement in regional municipal finances should also reduce the transfers received from the central government. This study aims at evaluating the effects of regionalization on regional development in recent years and in the near future. The study is related to an ongoing evaluation of the financial relations between the central government and local authorities.Regionalization has in practice meant the relocation of central government jobs. We can cover the relocation of jobs quite accurately, and also had a data to make a plausible valuation of the number of employees that actually relocated with the jobs. Moreover, we are able to calculate state transfers to municipalities at the level of individual municipalities within each region. However, to capture all the implications of relocation to regional economies, we extend the model to take into account the average size and age profile of the families of those who relocate. In this way, we obtain an estimate of the effects of regionalization on demand for public services locally, as well as on the overall effect on local population, labour supply and state, municipal and social security funds’ budget balances.We analyse regionalization at the level of the twenty regions of Finland, using a dynamic, regional, AGE model. Our main finding is that regionalization has negative overall economic effects for Finland – it decreases national product and employment, deteriorates the fiscal balance and increases state transfers to municipalities. However, these effects are small by magnitude. We found that the cumulative decrease in GDP until 2018 was a bit less than 0.05 percentages. The policy altogether succeeds in leveling regional disparities. We also find that while regionalization has been beneficial for many regions by creating new jobs and increasing municipal tax revenues, it has also used resources wastefully as there has been double efforts during the transition period.

Newly Arriving Immigrants as Labor Market Arbitrageurs: Evidence from the Minimum Wage

This paper investigates the local labor supply effects of changes to the minimum wage by examining the response of low-skilled immigrants' location decisions. Canonical models emphasize the importance of labor mobility when evaluating the employment effects of the minimum wage; yet few studies address this outcome directly. Low-skilled immigrant populations shift toward labor markets with stagnant minimum wages, and this result is robust to a number of alternative interpretations. This mobility provides behavior-based evidence in favor of a non-trivial disemployment effect of the minimum wage. Further, it reduces the estimated demand elasticity using teens; employment losses among native teens are substantially larger in states that have historically attracted few immigrant residents.

Bad attitude? Migrant workers, meat processing work and the local unemployed in a peripheral region of the UK

In the context of financial crisis and recession, concern has grown in the UK and elsewhere over the relationship between labour immigration and indigenous unemployment. This article argues that, to understand this relationship, it is necessary to adopt a historical perspective and examine closely both the experiences and representations of migrant and indigenous workers and the unemployed together, as these develop and evolve in local labour markets over time. Presenting a case study of employment shift at a meat processing factory in Merthyr Tydfil, Wales, the article demonstrates how the promotion and acceptance by employers and others of a discourse that constructs Merthyr locals as bad workers reframes a history of local labour conflict as a matter of endemic worker deficit, and shifts attention away from problems of poor job quality to alleged problems of poor local labour supply, thus legitimating the turn to employing migrant workers in the first place. It is argued that investigating these kinds of local labour market histories is essential for developing appropriate and effective policy on immigration, employment and unemployment alike.

Mineral development and regional employment effects in northern Sweden: a scenario-based assessment

This paper reports the main results of an assessment of the local and regional economic benefits of a new large-scale iron ore project that is currently being developed by Northland Resources in northern Sweden. Specifically, the mine is located in Pajala—a municipality of approximately 6,300 residents in Norrbotten County in northern Sweden. We employ the Swedish regional impact model rAps to estimate the local and regional benefits of the project, focusing mainly on the employment opportunities created by multiplier effects. The rAps-system links an input–output model of regional production with a demographic model of net migration and commuting. This allows us to use a scenario-based approach and simulate the impact of different demographic assumptions, which are key determinants of the magnitude of local benefits. The local labour supply is limited and if most of the workers are non-residents who commute, much of the household incomes generated by the project flow out of Pajala and benefit other municipalities in the region. Our results indicate that the local employment multiplier for Pajala varies between 1.4 to 1.6 depending on the demographic assumptions, but the effect on local incomes is limited if labour demand is serviced mainly by commuters from other municipalities. The estimated regional employment multiplier for Norrbotten County is approximately 1.7, reflecting that the bigger and more diverse regional economy is better equipped to supply inputs to mineral development projects.

Hometown Disadvantage? It Depends on Where You’re From

This article focuses on an overlooked factor in the unequal sorting of teachers across schools: the geographic preferences of teachers. Using data from the National Education Longitudinal Study, the author examines the patterns of geographic mobility of new teachers and compares them to the patterns of other college graduates. Specifically, the author demonstrates that teachers’ preference for working close to where they grew up is a distinct characteristic of teachers, and the author further explores the implications of those preferences for schools facing chronic shortages of teachers. The author finds that the local nature of the labor force and the differential rates of graduation and production of teachers from traditionally hard-to-staff schools are reinforcing existing deficits of local teacher labor supply.

How Do Industries and Firms Respond to Changes in Local Labor Supply?

This paper analyzes how changes in the skill mix of local labor supply are absorbed by the economy, distinguishing between three adjustment mechanisms: wages, expansion in size of those production units using the more abundant skill group more intensively, and more intensive use of the more abundant skill group within production units. We contribute to the literature by analyzing these adjustments on the firm rather than industry level, using German administrative data. We show that most adjustments occur within firms through changes in relative factor intensities and that firms entering and exiting the market are an important additional absorption mechanism.

Firing Costs and Flexibility: Evidence from Firms' Employment Responses to Shocks in India

A key prediction of models of dynamic labor demand is that restrictions on firing attenuate firms’ employment responses to economic fluctuations. The authors provide the first direct empirical test of this prediction using data on industrial firms in India. They exploit the fact that fluctuation in rainfall within districts, through its effects on agricultural productivity, generates variation in local demand and local labor supply. Using a measure of labor regulation strictness, they compare factories’ input and output responses to these shocks in pro-worker and pro-employer districts. Their results confirm the theory’s predictions: industrial employment is more sensitive to shocks in areas where labor regulations are less restrictive. They verify that their results are robust to controlling for endogenous firm placement and vary across factory size in the pattern predicted by the institutional features of labor laws in India. However, their results also indicate that the inability to adjust employment does not significantly appear to affect firm profits, suggesting that firms may be adjusting along other (unobservable) margins.

How Do Industries and Firms Respond to Changes in Local Labor Supply?

In this paper, we investigate how changes in the skill mix of local labor supply are absorbed by the economy. We distinguish between three adjustment mechanisms: through factor prices, through an expansion in the size of those production units that use the more abundant skill group more intensively, and through more intensive use of the more abundant skill group within production units. We investigate which of these channels is dominant. We contribute to the existing literature by analyzing these adjustments on the level of firms, rather than industries, and by assessing the role of new firms in the absorption process of labor supply shocks. Our analysis is based on administrative data, comprising the entirety of firms in Germany over a 10 years period. We find that, while factor price adjustments are important in the non-tradable sector, labor supply shocks do not induce factor price changes in the tradable sector. In this sector, most of the adjustment to changes in relative factor supplies takes place within firms by changing relative factor intensities. Given the non-response of factor prices, this finding points towards changes in production technology. Our results further show, that firms that enter and exit the market are an important additional channel of adjustment. Finally, we demonstrate that an industry level analysis is likely to over-emphasize technology-based adjustments.

Dwindling U.S. internal migration: Evidence of spatial equilibrium or structural shifts in local labor markets?

This paper examines whether the significant downward shift in U.S. gross migration rates after 2000 is indicative of the economy nearing a stationary spatial equilibrium characterized by relatively small population growth differentials. Nearing spatial equilibrium would imply that site-specific factors such as amenities and location within the urban hierarchy substantially subside in their influence on net-migration and relative population growth because their values have been capitalized into prices, causing interregional utility levels to become approximately equal. Yet, in an examination of U.S. counties, we find empirical evidence of only slight ebbing of natural amenity-based migration after 2000 and little slowing of population redistribution from peripheral towards core urban areas. Instead, the primary finding is a downward shift in the responsiveness of relative population growth to spatially asymmetric demand shocks post-2000, and associated increased responsiveness of local area labor supply, more consistent with European regional labor markets. Additional sensitivity analysis, including instrumental variable estimation, confirms the result. Quantile regression analysis suggests that our findings are not due to a difference in regional labor market tightness between the 1990s and post-2000.

Effects of Urban Growth Controls on Intercity Commuting

This paper presents an empirical study of the effects of urban growth controls on the intercity commuting of workers. Growth controls (land use regulations that attempt to restrict population growth and urban sprawl) have increased housing prices and diverted population growth to uncontrolled cities. It has been suggested that resulting changes in local labour supply might stimulate intercity commuting from uncontrolled to controlled cities. To test this hypothesis, a gravity model of commuting flows between places in California is estimated using alternative econometric methods (OLS, Heckman selection and count-data). The possibility of spatial dependence in commuting flows is also taken into consideration. Results suggest larger commuting flows to destination places that restrict residential growth.

Community Colleges, Clusters, and Competition: A Case from Washington Wine Country

Velluzzi N. D. Community colleges, clusters, and competition: a case from Washington wine country, Regional Studies. This paper investigates the role of community colleges in shaping the competitiveness of industry clusters. The following analysis presents a case study on the role of the Walla Walla Community College Center for Enology and Viticulture (the Center) cluster-based economic development strategy. The case study examines the ways the Center – which is in Washington State – operates as an intermediary that influences both local labour supply and the social foundations underpinning the production system. Based on case study evidence, it is concluded that the Center's cluster strategy can be understood as a process of ‘institutional thickening’ that enhances the competitiveness and performance of the localized wine industry. Velluzzi N. D. Les centres universitaires, les regroupements et la concurrence: une étude de cas du paysage vinicole de Washington, Regional Studies. Cet article cherche à examiner le rôle des centres universitaires dans la compétitivité des regroupements industriels. L'analyse présente une étude de cas du rôle de la stratégie du Centre d'oenologie et de viticulture à Walla Walla en faveur du développement économique basé sur la notion de regroupement. L'étude de cas examine la manière dont le Centre – situé dans l'état de Washington – fonctionne en tant qu'un intermédiaire qui influe à la fois sur l'offre d'emploi locale et les fondements sociaux qui étayent le système de production. A partir des preuves provenant de l'étude de cas, on conclut que la stratégie du Centre peut être considérée un processus ‘d’épaississement institutionnel' qui augmente la compétitivité et la performance de l'industrie vinicole locale. Centre universitaire Développement économique régional Regroupements Industrie vinicole Walla Walla (Etat de Washington) Velluzzi N. D. Staatliche Hochschulen, Cluster und Wettbewerb: eine Fallstudie aus dem Weinland von Washington, Regional Studies. In diesem Beitrag untersuchen wir die Rolle von staatlichen Hochschulen für die Wettbewerbsfähigkeit von Branchenclustern. In der folgenden Analyse wird eine Fallstudie über die Rolle des Walla Walla Community College Center für Önologie und Vitikultur (des Zentrums) für eine clusterbasierte Wirtschaftsentwicklungsstrategie vorgestellt. In der Fallstudie wird untersucht, wie das im Staat Washington gelegene Zentrum als Vermittler wirkt und sich sowohl auf das Arbeitskräfteangebot vor Ort als auch auf die gesellschaftlichen Grundlagen des Produktionssystems auswirkt. Anhand der Belege der Fallstudie wird der Schluss gezogen, dass sich die Cluster-Strategie des Zentrums als Prozess der ‘institutionellen Verdichtung’ verstehen lässt, mit dem die Wettbewerbsfähigkeit und Leistung der lokalen Weinindustrie verbessert werden. Staatliche Hochschule Regionale Wirtschaftsentwicklung Cluster Weinindustrie Walla Walla (Staat Washington) Velluzzi N. D. Universidades públicas, aglomeraciones y competición: el caso de las regiones vinícolas en Washington, Regional Studies. En este artículo se investiga qué papel desempeñan las universidades públicas a la hora de modelar la competitividad de las aglomeraciones de la industria. En el siguiente análisis se muestra un estudio de caso en cuanto al papel que desempeña el Centro Walla Walla de la Universidad Pública de Enología y Viticultura (el Centro) en la estrategia de desarrollo económico basada en las aglomeraciones. En este estudio de caso examino de qué modo el Centro – situado en el Estado de Washington – funciona como un intermediario que influye tanto en el suministro laboral a nivel local como en las bases sociales que apoyan el sistema de producción. Basándome en el ejemplo de un estudio de caso, llego a la conclusión de que la estrategia de aglomeración del Centro puede entenderse como un proceso de ‘concentración institucional’ que mejora la competitividad y el rendimiento de la industria vinícola localizada. Universidad pública Desarrollo económico regional Aglomeraciones Industria vinícola Walla Walla (Estado de Washington)

Voting with their feet: Relative economic conditions and state migration patterns

Over the past decade, state and local policymakers and business leaders across the U.S. have expressed concern regarding the ability to attract and retain skilled workers, given the economic climate of their states compared with other parts of the nation. Examining the factors underlying state-level migration trends is important to determine what role, if any, public policy might play in addressing their potential impact on local labor supply. Using data from the Internal Revenue Service for each of the 48 states in the continental United States from 1977 through 2006, this paper examines the role of three economic factors—namely labor market conditions, per capita incomes, and housing affordability—in determining domestic state-to-state migration flows. Estimates from a logistic model of out-migration show that while all three measures of relative economic conditions are significant determinants of migration, the magnitude of their impact varies and has changed considerably over time. For example, the importance of per capita income as a determining factor has fallen considerably since the late 1970s, while that of housing affordability has risen. Interestingly, the role of labor market conditions—while significant throughout the entire 30-year period—was most prominent in the late 1980s and early 1990s. Estimates from the model are used to forecast migration for 2009 for selected states. The results from this exercise are surprisingly accurate when compared to actual state migration patterns for that year.