Local Labor Demand Research Articles

Estimating Who Benefits from Productivity Growth: Local and Distant Effects of City Productivity Growth on Wages, Rents, and Inequality

Abstract We first estimate the direct effects on local workers’ earnings and housing costs from increases in local labor demand caused by gains in city-level manufacturing productivity. We find that local workers benefit from productivity growth, even after subtracting increases in housing costs. These gains are larger for local less educated workers, such that productivity growth reduces local inequality. We then propose and implement a new transparent method of estimating indirect effects of local productivity growth on earnings and housing costs of workers in other cities. We find that these general equilibrium effects are economically important and disproportionately benefit college-educated workers.

The effects of gender-specific local labor demand on birth and later outcomes

We study the effects of local labor market conditions during early pregnancy on birth and later outcomes. Using a longitudinal survey of newborns in Japan, we find that improvements in employment opportunities increase the probability of low birth weight and premature birth. We also examine the effects of gender-specific labor market conditions. An increase in labor demand for women has a large negative effect on gestational age, especially for mothers who gave birth at relatively young ages. However, we find little evidence of a lasting negative effect of an increase in labor demand during early pregnancy on serious health conditions or developmental delays in early childhood. Using prefecture-level panel data, we confirm that the negative effect on infant birth weight is not driven by selective fertility and mortality.

Trade-offs? The Impact of WTO Accession on Intimate Partner Violence in Cambodia

Abstract We study the impact of trade-induced changes in labor market conditions on violence within the household. We exploit the local labor demand shocks generated by Cambodia’s WTO accession to assess how changes in the employment of women relative to men affected the risk of intimate partner violence. We document that men in districts facing larger tariff reductions experienced a significant decline in paid employment, whereas women in harder-hit districts increased their entry into the labor force. These changes in employment patterns triggered backlash effects by increasing intimate partner violence, without changes in marriage, fertility, psychological distress, or household consumption.

Monopsony, Job Tasks and Labour Market Concentration

Abstract This paper extends the monopsony literature by taking a task-based approach and estimating the causal effect of concentration on labour market outcomes. Using detailed employer–employee data from Norway, we find that our job task-based measure shows lower degrees of concentration than conventional industry- and occupation-based measures. Exploiting mass lay-offs as exogenous shocks to local labour demand, we show that workers who experience mass separations in more concentrated markets have substantially worse subsequent labour market outcomes than workers in less concentrated markets. Our results point to the existence of employer market power that is driven by the concentration of skill demand across firms.

Contrasting the Local and National Demographic Incidence of Local Labor Demand Shocks

Contrasting the Local and National Demographic Incidence of Local Labor Demand Shocks

Understanding the racial employment gap: The role of sectoral shifts

The employment rate for Black men worsened significantly relative to White men during the second half of the 20th century. We explore the role of broad sectoral shifts in labor demand over this period in explaining this trend. We first quantify changes in local employment rates and population in response to local labor demand shifts for both groups of workers. We then combine our estimates with a stylized model that incorporates frictional local labor markets and imperfect mobility across markets. Our framework enables us to aggregate local responses while accounting for geographic mobility and regional employment composition. We find that sectoral reallocation can account for at most, one-fifth of the total exacerbation in the employment rate differential between Black and White men over 1970–2010. Out-migration from harder-hit markets, while large, only slightly mitigates the impact of negative labor demand shifts. We also find that most of the predicted change in the employment rate differential is due to differential response rather than differential exposure to sectoral shifts across groups.

Workers’ mobility across occupations: Complementary insights from the human capital, migration and social stratification literature.

PurposeA growing body of literature shows how intragenerational occupational mobility affects economic dynamics and social stratification. In this article the authors aim to carry out a structured review of this literature, outlining a systemic overview for more comprehensive research and public policies.Design/methodology/approachThe authors use methods from structured literature reviews and network science to reveal the segmented research landscape of occupational mobility literature. The authors made an in-depth analysis of the most important papers to summarize the main contributions of the literature and identify research gaps.FindingsThe authors reveal a segmented research landscape around three communities: (1) human capital theory, (2) social stratification theory and (3) migration studies. Human capital research uses microfounded mathematical modeling to understand the relationship between skills and mobility. Nevertheless, it cannot explain social segregation and generally does not focus on the importance of local labor demand. Social stratification research can explain the social and institutional barriers to occupational mobility. Migration research studies the relationship between migration, labor demand and social mobility.Originality/valueThis paper is the first literature review that uses network analysis to perform a systematic review of the intragenerational occupational mobility literature. Moreover, this review identifies opportunities for mutual learning and research gaps in the research landscape.

The role amenities play in spatial sorting of migrants and their impact on welfare: Evidence from China.

From 2005 to 2015, China's high-skilled labor was increasingly concentrated in cities with high wages and high rents, while a narrowing of the wage gap between high- and low-skilled labor showed an opposite trend to an increase in geographic sorting. In this research, I estimated a spatial equilibrium structural model to identify the causes of this phenomenon and its impact on welfare. Changes in local labor demand essentially led to an increase in skill sorting, and changes in urban amenities further contributed to this trend. An agglomeration of high-skilled labor raised local productivity, increased wages for all workers, reduced the real wage gap, and widened the welfare gap between workers with different skills. In contrast to the welfare effects of changes in the wage gap driven by exogenous productivity changes, changes in urban wages, rents, and amenities increased welfare inequality between high- and low-skilled workers, but this is mainly because the utility of low-skilled workers from urban amenities is constrained by migration costs; if migration costs caused by China's household registration policy were eliminated, changes in urban wages, rents, and amenities would reduce welfare inequality between high- and low-skilled workers to a greater extent than a reduction in the real wage gap between these two groups.

Internal Migration and Crime in Brazil

Research suggests that the social effects of internal migration may be substantially different from those associated with international immigration. In this paper, I provide the first evidence of the effect of internal migration on crime with panel data from Brazilian microregiões (microregions). Using local labor demand shocks as an instrumental variable, I find that a 10% increase in the in-migration rate translates to a 9.4% increase in the homicide rate in destination areas. I propose that the effect is driven by intermediating labor market effects and not by the migrants themselves. Exploring these possible channels, I do not find that crime-prone migrants drive the results. The effect is only significant in locations with high past crime rates, indicating crime inertia, and in places with a small informal sector, suggesting that the impact of internal migration is conditioned by the ability of local labor markets to accommodate migrants. This finding is supported by a negative effect of in-migration on formal employment in rigid markets and a positive effect on unemployment among young men, with the latter explaining most of the total effect.

Tax enforcement and corporate employment: Evidence from a quasi-natural experiment in China

This study investigates how tax enforcement affects corporate employment in China. We utilize the merger of the State Tax Bureau and Local Tax Bureaus as a quasi-natural experiment and adopt a difference-in-differences framework to identify causality. The results show that tougher tax enforcement has a significant and negative effect on corporate employment and that this effect is more pronounced for firms with higher labor intensity, greater financial constraints, more severe labor market frictions, a lower initial tax rate, lower tax transfer ability, and greater credit market imperfections. Further, the mechanism tests demonstrate that tougher tax enforcement leads to increases in the effective income tax rate, cash holdings, and the cash flow sensitivity of real investment but decreases in accounts receivable and dividend payments. These results are consistent with the liquidity constraints channel. In addition, we exclude several alternative explanations and conduct a series of robustness checks. Overall, our findings indicate that corporate tax enforcement has large effects on the local labor demand, which provides some useful insights for local governments to stabilize employment during the COVID-19 pandemic.

Mortgage cash-flows and employment

This paper quantifies the impact of the cash-flow channel of monetary policy on employment by combining novel micro datasets with near-universal coverage. When interest rates fall, mortgaged households spend an important share of the extra cash-flow in their local economy, increasing local labor demand. Overall, a reduction in mortgage payments of £1,000 per household leads to a 0.5 percentage point increase in locally non-tradable employment growth over three years, almost entirely driven by the restaurant sector. Employment-growth effects operate through the intensive margin for small establishments, lower death rates for the mid-sized and higher birth rates for the largest outlets.

Land-Use Regulations and Urban Growth of African Americans

Land-use regulations can restrict urban growth by increasing housing costs. This article investigates the heterogeneous effects of land-use regulations among different racial groups. It uses U.S. Census Bureau data from 202 U.S. metropolitan areas from 1980 to 2010 to investigate how land-use regulations affect changes in the share of African Americans in response to local economic demand. The research finds that highly regulated metropolitan areas experienced a much smaller increase (sometimes a decrease) in the share of African American workers in response to an increase in local labor demand. These results suggest that land-use regulations can restrict the urban growth of African Americans in areas with demand.

The Effects of Gender-Specific Local Labor Demand on Birth and Later Outcomes

The Effects of Gender-Specific Local Labor Demand on Birth and Later Outcomes

The Migration Accelerator: Labor Mobility, Housing, and Demand

What is the role of migration in regional evolutions? I document that within-US migration causes a reduction in the unemployment rate of the receiving city over several years. To establish this causal effect, I construct an instrument using out-migration of other places and predict its destination from historical patterns. The decline in unemployment is due to housing. Housing is durable, so increased demand causes a surge of new houses and construction jobs. Additionally, migrants’ housing demand raises prices, increasing borrowing and nontradable employment. This finding implies the endogenous response of migration amplifies local labor demand shocks by about a third. (JEL J61, J64, R21, R23, R31)

The Incidence of Local Labor Demand Shocks

Low-skill workers are comparatively immobile. This paper estimates the role of housing prices and social transfers in accounting for this fact using a spatial equilibrium model. Reduced-form estimates using US census data show that positive local labor demand shocks increase population more than negative shocks reduce population, that this asymmetry is larger for low-skill workers, and that such an asymmetry is absent for average wages, housing values, and rental prices. Generalized method of moments estimates reveal that the comparative immobility of low-skill workers is due not to higher mobility costs but to a lower incidence of adverse labor demand shocks.

The effect of natural disasters on economic activity in US counties: A century of data

More than 100 natural disasters strike the United States every year, causing extensive fatalities and damages. We construct the universe of US federally designated natural disasters from 1920 to 2010. We find that severe disasters increase out-migration rates at the county level by 1.5 percentage points and lower housing prices/rents by 2.5–5.0 percent. The migration response to milder disasters is smaller but has been increasing over time. The economic response to disasters is most consistent with falling local productivity and labor demand. Disasters that convey more information about future disaster risk increase the pace of out-migration.

Macroeconomic conditions and child schooling in Turkey

This paper examines the effects of macroeconomic shocks on child schooling in Turkey using household labor force surveys from 2005–2013. We use variation in local labor demand as an instrumental variable, particularly regional industry composition and national industry employment growth rates. The results demonstrate that child schooling is pro-cyclical in Turkey, with the most acute effects among children with less educated parents and living in rural areas. Finally, as hypothesized, we find asymmetric effects on child schooling based on skill composition of employment growth–higher unemployment among unskilled workers increases schooling, whereas higher unemployment among skilled workers decreases schooling.

Local labour demand and immigrant employment

This study investigates the effect of local labour demand on employment of immigrant workers. We address the challenge of location sorting by estimating the effects of initial local labour demand for refugees who were subject to the Danish Spatial Dispersal Policy from 1999–2010. After location assignment, refugees participate in a 3-year introduction programme; eligibility to means-tested welfare benefits during programme participation is conditional on residing in the assigned municipality. We use full population Danish administrative registers that contain information on admission class of immigrants and identify refugee status without any measurement error. Our findings show that four years after assignment, 83% of refugees still live in the assigned municipality. Moreover, assignment to a municipality with a one percentage point higher employment rate increases the employment probability of refugees by 0.5–0.6 percentage points (elasticities 1.1–1.8) two to four years after arrival in Denmark. We also find consistent significant effects of alternative measures of local labour demand on employment chances of refugees. Our results provide quasi-experimental evidence that immigrant employment is sensitive to labour market conditions in the initial location and highlight the importance of carefully designing refugee allocation policies.

Pandemics, Global Supply Chains, and Local Labor Demand: Evidence from 100 Million Posted Jobs in China

This paper studies how the COVID-19 pandemic has affected labor demand using over 100 million posted jobs on one of the largest online platforms in China. Our data reveals that, due to the effects of the pandemic both in China and abroad, the number of newly posted jobs within the first 13 weeks after the Wuhan lockdown on January 23, 2020 was about one third lower than that of the same lunar calendar weeks in 2018 and 2019. Using econometric methods, we show that, via the global supply chain, COVID-19 cases abroad and in particular pandemic-control policies by foreign governments reduced new job creations in China by 11.7%. We also find that Chinese firms most exposed to international trade outperformed other firms at the beginning of the pandemic but underperformed during recovery as the Novel Coronavirus spread throughout the world.

Pandemics, Global Supply Chains, and Local Labor Demand: Evidence from 100 Million Posted Jobs in China

This paper studies how the COVID-19 pandemic has affected labor demand using over 100 million posted jobs on one of the largest online platforms in China. Our data reveals that, due to the effects of the pandemic both in China and abroad, the number of newly posted jobs within the first 13 weeks after the Wuhan lockdown on January 23, 2020 was about one third lower than that of the same lunar calendar weeks in 2018 and 2019. Using econometric methods, we show that, via the global supply chain, COVID-19 cases abroad and in particular pandemic-control policies by foreign governments reduced new job creations in China by 11.7%. We also find that Chinese firms most exposed to international trade outperformed other firms at the beginning of the pandemic but underperformed during recovery as the Novel Coronavirus spread throughout the world.