Local Labor Markets and Human Capital Investments

Research output: Working paper


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.
Original languageEnglish (US)
Number of pages82
StatePublished - Mar 11 2017

Publication series

NameIZA Discussion Paper


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

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