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The Decline of the U.S. Rust Belt: A Macroeconomic Analysis

Author

Listed:
  • Lee Ohanian

    (University of California Los Angeles)

  • David Lagakos

    (Arizona State University)

  • Simeon Alder

    (University of Notre Dame)

Abstract

Some regions of the United States fared much worse than others since the end of WWII. In this paper we document that those regions faring worst in terms of wage and employment growth from 1950-2000 tended to be those in which workers earned the largest wage premiums in 1950. We use this evidence to develop a theory of the decline of the ``Rust Belt'' region, which was highly unionized and paid workers substantially more than other workers of similar skill levels. We develop our theory in a two-region, open-economy version of the Neoclassical Growth model, which we parameterize to match key features of regional and aggregate data. We then use the model to ask how much differently the Rust Belt would have fared if its labor market had not been as distorted.

Suggested Citation

  • Lee Ohanian & David Lagakos & Simeon Alder, 2012. "The Decline of the U.S. Rust Belt: A Macroeconomic Analysis," 2012 Meeting Papers 793, Society for Economic Dynamics.
    • Handle: RePEc:red:sed012:793
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    References listed on IDEAS

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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Labor Unions and the Rust Belt
      by afinetheorem in A Fine Theorem on 2014-11-05 03:46:39

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    Cited by:

    1. Emin Dinlersoz & Jeremy Greenwood & Henry Hyatt, 2014. "Who do Unions Target? Unionization over the Life-Cycle of U.S. Businesses," NBER Working Papers 20151, National Bureau of Economic Research, Inc.
    2. Breinlich, Holger & Ottaviano, Gianmarco I.P. & Temple, Jonathan R.W., 2014. "Regional Growth and Regional Decline," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 4, pages 683-779, Elsevier.
    3. Chamna Yoon, 2017. "Estimating A Dynamic Spatial Equilibrium Model To Evaluate The Welfare Implications Of Regional Adjustment Processes: The Decline Of The Rust Belt," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 58(2), pages 473-497, May.
    4. Cedric E. Dawkins, 2019. "A Normative Argument for Independent Voice and Labor Unions," Journal of Business Ethics, Springer, vol. 155(4), pages 1153-1165, April.
    5. Emin Dinlersoz & Jeremy Greenwood & Henry Hyatt, 2017. "What Businesses Attract Unions? Unionization over the Life Cycle of U.S. Establishments," ILR Review, Cornell University, ILR School, vol. 70(3), pages 733-766, May.
    6. Dinlersoz, Emin & Greenwood, Jeremy & Hyatt, Henry R., 2014. "Who Do Unions Target? Unionization over the Life-Cycle of U.S. Businesses," IZA Discussion Papers 8416, Institute of Labor Economics (IZA).
    7. Mealy, Penny & Farmer, J. Doyne & Hausmann, Ricardo, 2018. "Determining the Differences that Matter: Development and Divergence in US States over 1850-2010," Working Paper Series rwp18-030, Harvard University, John F. Kennedy School of Government.
    8. Emin M. Dinlersoz & Jeremy Greenwood, 2012. "The Rise and Fall of Unions in the U.S," NBER Working Papers 18079, National Bureau of Economic Research, Inc.
    9. Thorsten Drautzburg & Jesus Fernandez-Villaverde & Pablo Guerrón-Quintana, 2017. "Political Distribution Risk and Aggregate Fluctuations," PIER Working Paper Archive 17-016, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 25 Jul 2017.
    10. Illenin O. Kondo, 2013. "Trade Reforms, Foreign Competition, and Labor Market Adjustments in the U.S," International Finance Discussion Papers 1095, Board of Governors of the Federal Reserve System (U.S.).
    11. Ore Koren & Laura Mann, 2018. "Nighttime Light, Superlinear Growth, and Economic Inequalities at the Country Level," Papers 1810.12996, arXiv.org.
    12. Emin M. Dinlersoz & Jeremy Greenwood, 2012. "The Rise and Fall of Unions in the U.S," NBER Working Papers 18079, National Bureau of Economic Research, Inc.
    13. Oleg Itskhoki & Benjamin Moll, 2019. "Optimal Development Policies With Financial Frictions," Econometrica, Econometric Society, vol. 87(1), pages 139-173, January.

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