Dynamic responses to labor demand shocks: Evidence from the financial industry in Delaware

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Abstract

This paper analyzes an important shock to local labor demand in financial services: firm relocation to Delaware following a Supreme Court ruling and state legislation in the 1980s. Using synthetic controls and bordering states, I find large effects on employment, unemployment, and participation in the first decade. Wage effects, and in many cases employment spillovers to the nontradable sector, appear larger than estimates from shocks to the tradable sector. Effects persist for ten to twenty years after Delaware loses its original policy-induced advantage. The shift towards a low unemployment sector explains this persistence, rather than direct productivity effects or agglomeration.

Original languageEnglish (US)
Pages (from-to)27-45
Number of pages19
JournalJournal of Urban Economics
Volume106
DOIs
StatePublished - Jul 2018

ASJC Scopus subject areas

  • Economics and Econometrics
  • Urban Studies

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