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Employment, Unemployment and Demand Shifts in Local Labor Markets

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  • Harry J. Holzer

Abstract

This paper analyzes the effects of demand shifts within and between local labor markets on unemployment and employment levels and changes observed in those markets. Between-market demand shifts are measured by the means of sales growth for firms in each market, while within-market shifts are measured by variances in each. The variances are also decomposed into between-industry and within-industry components. Some firm-level evidence on job applicants, training and wage and employment adjustments in growing and declining firms is presented as well. The results show that demand shifts between markets account for large fractions of the observed variation in unemployment and employment rate levels and changes across markets. Within-area shifts cause much smaller and insignificant amounts of unemployment if they are between-industry, while shifts within areas and industries (accounting for the vast majority of demand shifts across firms) have no clear effects. The results therefore suggest that the unemployment effects of demand shifts depend on adjustment costs, which appear to be greatest for shifts between markets. Nonlinearities in estimated effects and growing dispersion of unemployment rates across areas also suggest that demand shifts may have raised aggregate unemployment in the U.S. in recent years.

Suggested Citation

  • Harry J. Holzer, 1989. "Employment, Unemployment and Demand Shifts in Local Labor Markets," NBER Working Papers 2858, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:2858
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    Cited by:

    1. Stanley R. Keil & Lee C. Spector, 2005. "The Impact of Wal-Mart on Employment Andwage Differentials in Alabama," Working Papers 200508, Ball State University, Department of Economics, revised Dec 2005.
    2. Maria Francesca Cracolici & Miranda Cuffaro & Peter Nijkamp, 2007. "Geographical Distribution of Unemployment: An Analysis of Provincial Differences in Italy," Growth and Change, Wiley Blackwell, vol. 38(4), pages 649-670.
    3. Roberto Basile & Alessandro Girardi & Marianna Mantuano & Francesco Pastore, 2012. "Sectoral shifts, diversification and regional unemployment: evidence from local labour systems in Italy," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 39(4), pages 525-544, November.
    4. Greenwood, Michael J. & Hunt, Gary L. & Kohli, Ulrich, 1997. "The factor-market consequences of unskilled immigration to the United States," Labour Economics, Elsevier, vol. 4(1), pages 1-28, March.
    5. Note: For best results & the figures should be printed on a non-Postscript printer. Hoynes & H., "undated". "The Employment, Earnings, and Income of Less-Skilled Workers over the Business Cycle," Institute for Research on Poverty Discussion Papers 1199-99, University of Wisconsin Institute for Research on Poverty.
    6. Hilary Williamson Hoynes, 2000. "Local Labor Markets And Welfare Spells: Do Demand Conditions Matter?," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 351-368, August.
    7. Andrew Figura, 2003. "The effect of restructuring on unemployment," Finance and Economics Discussion Series 2003-56, Board of Governors of the Federal Reserve System (U.S.).
    8. Elhorst, J. Paul, 2000. "The Mystery Of Regional Unemployment Differentialsa Survey Of Theoretical And Empirical Explanations," ERSA conference papers ersa00p60, European Regional Science Association.
    9. James Hines & Hilary Hoynes & Alan B. Krueger, 2001. "Another Look at Whether a Rising Tide Lifts All Boats," Working Papers 833, Princeton University, Department of Economics, Industrial Relations Section..
    10. Petri Bockerman, 2004. "Does labour market reorganization reduce unemployment?," Applied Economics Letters, Taylor & Francis Journals, vol. 11(12), pages 745-748.
    11. Jung Hyun Choi & Richard K. Green, 2014. "Human Capital Spillovers and Local Unemployment," Working Paper 9319, USC Lusk Center for Real Estate.
    12. Long, Mark C. & Goldhaber, Dan & Huntington-Klein, Nick, 2015. "Do completed college majors respond to changes in wages?," Economics of Education Review, Elsevier, vol. 49(C), pages 1-14.
    13. Luz Magdalena Salas Bahamón & Fabio Sánchez Torres, 2004. "How do the Colombian Families Respond to the Changes in the Economic Conditions?," IDB Publications (Working Papers) 4397, Inter-American Development Bank.
    14. Rick Audas & Peter Dolton, 1998. "The effect of local labour market conditions on the decision to migrate among UK graduates," ERSA conference papers ersa98p245, European Regional Science Association.
    15. repec:dgr:rugsom:00c06 is not listed on IDEAS
    16. Pastore, Francesco, 2013. "Primum vivere… Industrial Change, Job Destruction and the Geographical Distribution of Unemployment," IZA Discussion Papers 7126, Institute for the Study of Labor (IZA).
    17. Glendon, Spencer P. & Vigdor, Jacob L., 2003. "Thy neighbor's jobs: geography and labor market dynamics," Regional Science and Urban Economics, Elsevier, vol. 33(6), pages 663-693, October.
    18. Fabio Sánchez & Luz Magdalena Salas & Oskar Nupia, 2003. "En Colombia 1984-2000: ¿Quién Gana Más, Quién Pierdemás?," DOCUMENTOS CEDE 002124, UNIVERSIDAD DE LOS ANDES-CEDE.
    19. Partridge, Mark D. & Rickman, Dan S., 1998. "Regional differences in chronic long-term unemployment," The Quarterly Review of Economics and Finance, Elsevier, vol. 38(2), pages 193-215.
    20. Henryk Gurgul, 2007. "Stochastic input-output modeling," Managerial Economics, AGH University of Science and Technology, Faculty of Management, vol. 2, pages 57-70.

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