The Geography of Labor Demand Shocks

Forskningsenhed: EPRU


Abstract:
In this project, we explore how the economic consequences of mass layoffs propagate geographically. Such event are typically unrelated to local economic conditins and we therefore consider them as exogenous shocks to labor demand (Gathman, Helm and Schönber, 2018). We investigate how mechanical exposure to mass layoffs - the areas where employees live and spend before a mass layoff - as well as the ultimate economic consequences of mass layoffs - the areas that see effects on income and spending because of a mass layoff - vary with distance to the epicenter. The unit of analysis is the local area and given that shocks propagate through labor income as well as consumer spending, we consider two outcomes: the amount of income earned by the local households and the amount of money spent int the local shops. We will thus ask two types of research questions. How does the magnitude of the income and spending shocks sufferd by local areas differ at 5km, 10km, 20 km distance from the form laying off workers? How much of the income and spending losses has been recovered after 6 months, 12 months and 24 months at each of these distances?

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