Local Labor Markets

By Enrico Moretti. Social Science Research Network, 2010

832 citations recorded by the source corpus.

I examine the causes and the consequences of differences in labor market outcomes across local labor markets within a country. The focus is on a long-run general equilibrium setting, where workers and firms are free to move across localities and local prices adjust to maintain the spatial equilibrium. In particular, I develop a tractable general equilibrium framework of local labor markets with heterogenous labor. This framework is useful in thinking about differences in labor market outcomes of different skill groups across locations. It clarifies how, in spatial equilibrium, localized shocks to a part of the labor market propagate to the rest of the economy through changes in employment, wages and local prices and how this diffusion affects workers' welfare. Using this framework, I address three related questions. First, I analyze the welfare consequences of productivity differences across local labor markets. I seek to understand what happens to the wage, employment and utility of workers with different skill levels when a local economy experiences a shift in the productivity of a group of workers. Second, I analyze the causes of productivity differences across local labor markets. To a large extent, productivity differences within a country are unlikely to be exogenous. I review the theoretical and empirical literature on agglomeration economies, with a particular focus on studies that are relevant for labor economists. Finally, I discuss the implications for policy.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/b6b7b902909f1f50c34ecf6b9909967db7884731

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In Economics and Econometrics

Citations in the corpus

Natural disasters and labor markets (2017, methodology): “Building on the literature on local labor markets (Moretti, 2010a,b), this paper investigates whether there is evidence that changes in the relative prices of non-tradable to tradable goods induced by a demand shock due to a natural disaster lead to a reallocation of employment and wage premia…”
Trade Shocks and the Provision of Local Public Goods (2017, background): “While the literature had previously emphasized labor mobility as a means of maintaining parity in locational preferences (Rosen, 1979; Roback, 1982), recent empirical research suggests that labor mobility is slow and incomplete (Topel, 1986; Blanchard and Katz, 1992; Glaeser and Gyourko, 2005), and ”
Cash holdings and labor heterogeneity:the role of skilled labor (2017, neutral): “First, they increase the probability of firms filling vacancies, thus reducing search, selection, and hiring costs (Moretti 2011).”
Location-based tax incentives: Evidence from India (2017, background): “Moretti (2013a): “Local Economic Development, Agglomeration Economies and the Big Push: 100 Years of Evidence from the Tennessee Valley Authority,” forthcoming Quarterly Journal of Economics.”
Immigration and Wage Dynamics: Evidence from the Mexican Peso Crisis (2020, background): “Both Diamond (2013) and Notowidigdo (2013) have two skill types and reallocation costs, as in Topel (1986), but they model the reallocation decision using a discrete choice model.”
A Spatial Knowledge Economy (2019, neutral): “Empirically, larger cities exhibit higher nominal wages in industries that produce tradable goods, which means that productivity is higher in these locations (Moretti, 2011).”
Spatial wage disparities: Sorting matters! (2008, neutral): “We can now turn to the different estimation issues.”
STEM Workers, H-1B Visas, and Productivity in US Cities (2015, positive): “A plausible explanation, emphasized by Moretti (2011) and Saiz (2007), is that the cost of non-tradable services, mainly housing rents, increases in the cities experiencing wage growth.”
Agglomeration Effects in Colombia (2016, neutral): “…of Colombia is extremely varied with much of its territory either dominated by the mountains of the Andes or, at the other extreme lowlands 1For instance, the innovative study of Greenstone, Hornbeck, and Moretti (2010) uses data from jurisdictions competing to host new large assembly plants.”
Assessing the Incidence and Efficiency of a Prominent Place Based Policy (2013, neutral): “Finally, we allow for upward sloping housing supply curves in each neighborhood as in Moretti (2010,2011) and Notowidigdo (2010).”