Housing booms, manufacturing decline and labour market outcomes

Kerwin Kofi Charles, Erik Hurst, Matthew J. Notowidigdo*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

36 Scopus citations

Abstract

We study how manufacturing decline and local housing booms contributed to changes in labour market outcomes during the 2000s, focusing on the distributional consequences across geographical areas and demographic groups. Using a local labour markets design, we estimate that manufacturing decline significantly reduced employment between 2000 and 2006, while local housing booms increased employment. These results suggest that housing booms ‘masked’ employment declines that would have occurred earlier in the absence of the booms. This ‘masking’ occurred both within and between cities and demographic groups. We find that roughly 40% of the reduction in employment during the 2000s can be attributed to manufacturing decline and that these negative effects would have appeared earlier had it not been for the large, temporary increases in housing demand.

Original languageEnglish (US)
Pages (from-to)209-248
Number of pages40
JournalEconomic Journal
Volume129
Issue number617
DOIs
StatePublished - 2019

Funding

This is a revised version of a previously distributed NBER Working Paper (no. 18949). We thank John Bound, Tom Davidoff, Matt Gentzkow, Ed Glaeser, Erzo Luttmer, Frederic Vermeulen (Editor) and four anonymous referees for their detailed feedback and we thank Hank Farber and Tom Lemieux for their comments as discussants. Additionally, we thank seminar participants at Columbia, Duke, Harvard, Maryland, Northwestern, Princeton, Tulane, University of British Columbia, University of Chicago, University of Illinois at Chicago, the AEA, Einaudi Institute, the NBER Summer Institute (Macro Perspectives) and the Atlanta, Chicago, Cleveland and New York Federal Reserves for helpful comments. We are grateful to Loren Fryxell, David Toniatti and Dan Zangri for excellent research assistance. We gratefully acknowledge the Initiative on Global Markets at the University of Chicago Booth School of Business for financial support. Hurst thanks the Peter Wall Institute for Advanced Studies at the University of British Columbia and Notowidigo thanks the Einaudi Institute for both their financial support and hospitality while working on this project. This is a revised version of a previously distributed NBER Working Paper (no. 18949). We thank John Bound, Tom Davidoff, Matt Gentzkow, Ed Glaeser, Erzo Luttmer, Frederic Vermeulen (Editor) and four anonymous referees for their detailed feedback and we thank Hank Farber and Tom Lemieux for their comments as discussants. Additionally, we thank seminar participants at Columbia, Duke, Harvard, Maryland, Northwestern, Princeton, Tulane, University of British Columbia, University of Chicago, University of Illinois at Chicago, the AEA, Einaudi Institute, the NBER Summer Institute (Macro Perspectives) and the Atlanta, Chicago, Cleveland and New York Federal Reserves for helpful comments. We are grateful to Loren Fryxell, David Toniatti and Dan Zangri for excellent research assistance. We gratefully acknowledge the Initiative on Global Markets at the University of Chicago Booth School of Business for financial support. Hurst thanks the Peter Wall Institute for Advanced Studies at the University of British Columbia and Notowidigo thanks the Einaudi Institute for both their financial support and hospitality while working on this project. 1 See Moffitt (2012) for a discussion of this phenomenon.

ASJC Scopus subject areas

  • Economics and Econometrics

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