Economics External Seminar: Rick Mansfield (Colorado)

28 May 2019, 4.00 PM - 28 May 2019, 5.15 PM

Rick Mansfield (Colorado)

1B6 Priory Road Complex

TITLE: “How Local Are U.S. Labor Markets?: Using an Assignment Model to Forecast the Geographic and Skill Incidence of Local Labor Demand Shocks” 

ABSTRACT: This paper examines how spatial frictions in labor markets differ by worker skill type and establishment industry, size, and skill requirements, and how such frictions shape the geographic and skill incidence of alternative local labor demand shocks, with implications for the appropriate level of government at which to fund ``local'' economic initiatives.  LEHD data capturing the near universe of U.S. job transitions from 19 states facilitate the estimation of a rich two-sided assignment model of the labor market featuring thousands of parameters.  The model is then used to generate simulated forecasts of many alternative local shocks featuring different establishment compositions.  These forecasts suggest that existing local workers from the targeted public-use microdata area (encompassing at least 100,000 workers) account for only 7.0% (8.1%) of total welfare (employment) gains from stimulus shocks adding 500 jobs to a particular census tract, with at least 41.6% (34.5%) of welfare (employment) gains accruing to out-of-state workers. This is despite the fact that projected welfare and employment rate increases from a typical positive shock are 3 times larger for existing workers in the targeted Census tract than for workers from an adjacent tract, because workers in the target tract (or even the target PUMA) are a minuscule share of the national labor market.  Further, the projected earnings incidence across local skill groups is quite sensitive to the shock's establishment type composition, though alternative compositions produce increasingly similar incidence across skill groups at greater distances from the shock. 

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