NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Local Labor Markets

Enrico Moretti

NBER Working Paper No. 15947
Issued in April 2010
NBER Program(s):   LS

I examine the causes and the consequences of differences in labor market outcomes across local labor markets within a country. The focus is on a long-run general equilibrium setting, where workers and firms are free to move across localities and local prices adjust to maintain the spatial equilibrium. In particular, I develop a tractable general equilibrium framework of local labor markets with heterogenous labor. This framework is useful in thinking about differences in labor market outcomes of different skill groups across locations. It clarifies how, in spatial equilibrium, localized shocks to a part of the labor market propagate to the rest of the economy through changes in employment, wages and local prices and how this diffusion affects workers' welfare. Using this framework, I address three related questions. First, I analyze the welfare consequences of productivity differences across local labor markets. I seek to understand what happens to the wage, employment and utility of workers with different skill levels when a local economy experiences a shift in the productivity of a group of workers. Second, I analyze the causes of productivity differences across local labor markets. To a large extent, productivity differences within a country are unlikely to be exogenous. I review the theoretical and empirical literature on agglomeration economies, with a particular focus on studies that are relevant for labor economists. Finally, I discuss the implications for policy.

download in pdf format
   (659 K)

email paper

This paper is available as PDF (659 K) or via email.

This paper was revised on December 5, 2011

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w15947

Published: Local Labor Markets, Handbook of Labor Economics , O. Ashenfelter and D. Card Eds., Elsevier, North Holland, 2011.

Users who downloaded this paper also downloaded these:
Glaeser and Gottlieb w14806 The Wealth of Cities: Agglomeration Economies and Spatial Equilibrium in the United States
Moretti w9641 Human Capital Externalities in Cities
Notowidigdo w17167 The Incidence of Local Labor Demand Shocks
Rogerson and Shimer w15901 Search in Macroeconomic Models of the Labor Market
Moretti w14370 Real Wage Inequality
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us