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Local Labor Markets and Human Capital Investments

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  • Weinstein, Russell

    () (University of Illinois at Urbana-Champaign)

Abstract

I study whether human capital investments are based on local rather than national demand, and whether this is explained by migration or information frictions. I analyze three sector-specific shocks with differential local effects, including the dot-com crash, the 2008 financial crisis, and a shock transforming Delaware into an international financial center. I find universities in areas more exposed to sectoral shocks experience greater changes in sector-relevant majors. Using rich student-level data, I find this is not explained by information frictions, but more likely by migration frictions. The results suggest encouraging human capital investments based on national demand may increase mismatch.

Suggested Citation

  • Weinstein, Russell, 2017. "Local Labor Markets and Human Capital Investments," IZA Discussion Papers 10598, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp10598
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    References listed on IDEAS

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    Cited by:

    1. Liu, Shimeng & Sun, Weizeng & Winters, John V., 2017. "Up in STEM, Down in Business: Changing College Major Decisions with the Great Recession," IZA Discussion Papers 10996, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    college major choice; local labor markets; migration frictions; information frictions;

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • I20 - Health, Education, and Welfare - - Education - - - General
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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