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Manufacturing Decline, Housing Booms, and Non-Employment

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  • Kerwin Kofi Charles
  • Erik Hurst
  • Matthew J. Notowidigdo

Abstract

We assess the extent to which manufacturing decline and housing booms contributed to changes in U.S. non-employment during the 2000s. Using a local labor market design, we estimate that manufacturing decline significantly increased non-employment during 2000-2007, while local housing booms decreased non-employment by roughly the same magnitude. The effects of manufacturing decline persist through 2011, but we find no persistent non-employment effects of local housing booms, most plausibly because housing booms were associated with subsequent busts of similar magnitude. We also find that housing booms significantly reduce the likelihood that displaced manufacturing workers remain non-employed, suggesting that housing booms "mask" non-employment growth that would have otherwise occurred earlier in the absence of the booms. Applying our estimates to the national labor market, we find that housing booms reduced non-employment growth by roughly 30 percent during 2000-2007 and that roughly 40 percent of the aggregate increase in non-employment during 2000-2011 can be attributed to manufacturing decline. Collectively, our results suggest that much of the non-employment growth during the 2000s can be attributed to manufacturing decline and these effects would have appeared in aggregate statistics earlier had it not been for the large, temporary increases in housing demand.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18949.

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Date of creation: Apr 2013
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Handle: RePEc:nbr:nberwo:18949

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Cited by:
  1. Robert J. Gordon, 2014. "The Demise of U.S. Economic Growth: Restatement, Rebuttal, and Reflections," NBER Working Papers 19895, National Bureau of Economic Research, Inc.
  2. Christopher L. Smith, 2013. "The dynamics of labor market polarization," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2013-57, Board of Governors of the Federal Reserve System (U.S.).
  3. Aaronson, Stephanie & Cajner, Tomaz & Fallick, Bruce C. & Galbis-Reig, Felix & Smith, Christopher & Wascher, William L., 2014. "Labor Force Participation: Recent Developments and Future Prospects," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2014-64, Board of Governors of the Federal Reserve System (U.S.).
  4. Manuel Adelino & Song Ma & David T. Robinson, 2014. "Firm Age, Investment Opportunities, and Job Creation," NBER Working Papers 19845, National Bureau of Economic Research, Inc.
  5. Brian C. Cadena & Brian K. Kovak, 2013. "Immigrants Equilibrate Local Labor Markets: Evidence from the Great Recession," NBER Working Papers 19272, National Bureau of Economic Research, Inc.
  6. Schnepel, Kevin, 2014. "Good Jobs and Recidivism," Working Papers 2014-10, University of Sydney, School of Economics.

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