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Commuting, Migration and Local Employment Elasticities

Author

Listed:
  • Ferdinando Monte

    () (Georgetown University)

  • Stephen Redding

    (Princeton University)

  • Esteban Rossi-Hansberg

    (Princeton University)

Abstract

We provide theory and evidence that the elasticity of local employment to a labor demand shock is heterogeneous depending on the commuting openness of the local labor market. We develop a quantitative general equilibrium model that incorporates spatial linkages in goods markets (trade) and factor markets (commuting and migration). We quantify this model to match the observed gravity equation relationships for trade and commuting. We find that empirically-observed reductions in commuting costs generate welfare gains of around 3.3 percent. We provide separate evidence in support of the model's predictions using decompositions of employment changes, million dollar plants, and trade shocks.

Suggested Citation

  • Ferdinando Monte & Stephen Redding & Esteban Rossi-Hansberg, 2017. "Commuting, Migration and Local Employment Elasticities," Working Papers 2017-073, Human Capital and Economic Opportunity Working Group.
  • Handle: RePEc:hka:wpaper:2017-073
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    File URL: http://humcap.uchicago.edu/RePEc/hka/wpaper/Monte_Redding_Rossi-Hansberg_2017_commuting-migration-local-emp.pdf
    File Function: First version, September 25, 2017
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    labor supply elasticity; shocks; general equilibrium; spatial linkages;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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