NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Manufacturing Decline, Housing Booms, and Non-Employment

Kerwin Kofi Charles, Erik Hurst, Matthew J. Notowidigdo

NBER Working Paper No. 18949
Issued in April 2013
NBER Program(s):   EFG   LS   ME   PE

We assess the extent to which manufacturing decline and housing booms contributed to changes in U.S. non-employment during the 2000s. Using a local labor market design, we estimate that manufacturing decline significantly increased non-employment during 2000-2007, while local housing booms decreased non-employment by roughly the same magnitude. The effects of manufacturing decline persist through 2011, but we find no persistent non-employment effects of local housing booms, most plausibly because housing booms were associated with subsequent busts of similar magnitude. We also find that housing booms significantly reduce the likelihood that displaced manufacturing workers remain non-employed, suggesting that housing booms "mask" non-employment growth that would have otherwise occurred earlier in the absence of the booms. Applying our estimates to the national labor market, we find that housing booms reduced non-employment growth by roughly 30 percent during 2000-2007 and that roughly 40 percent of the aggregate increase in non-employment during 2000-2011 can be attributed to manufacturing decline. Collectively, our results suggest that much of the non-employment growth during the 2000s can be attributed to manufacturing decline and these effects would have appeared in aggregate statistics earlier had it not been for the large, temporary increases in housing demand.

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This paper was revised on April 10, 2013

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w18949

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