NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Commuting, Migration and Local Employment Elasticities

Ferdinando Monte, Stephen J. Redding, Esteban Rossi-Hansberg

NBER Working Paper No. 21706
Issued in November 2015, Revised in November 2016
NBER Program(s):   ITI   LS

To understand the elasticity of employment to local labor demand shocks, we develop a quantitative general equilibrium model that incorporates spatial linkages in goods markets (trade) and factor markets (commuting and migration). We show that local employment elasticities differ substantially across U.S. counties and commuting zones in ways that are not well explained by standard empirical controls but are captured by commuting measures. We provide independent evidence for these predictions from million dollar plants and find that empirically-observed reductions in commuting costs generate welfare gains of around 3.3 percent and employment reallocations from -20 to 30 percent.

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Document Object Identifier (DOI): 10.3386/w21706

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