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Commuting, migration, and local employment elasticities

Author(s): Monte, Ferdinando; Redding, Stephen J.; Rossi-Hansberg, Esteban A.

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Abstract: © 2018 American Economic Association. We provide theory and evidence that the elasticity of local employment to a labor demand shock is heterogeneous depending on the commuting openness of the local labor market. We develop a quantitative general equilibrium model that incorporates spatial linkages in goods markets (trade) and factor markets (commuting and migration). We quantify this model to match the observed gravity equation relationships for trade and commuting. We find that empirically- observed reductions in commuting costs generate welfare gains of around 3.3 percent. We provide separate quasi- experimental evidence in support of the model's predictions using the location decisions of million dollar plants.
Publication Date: 1-Dec-2018
Citation: Monte, F, Redding, SJ, Rossi-Hansberg, E. (2018). Commuting, migration, and local employment elasticities. American Economic Review, 108 (12), 3855 - 3890. doi:10.1257/aer.20151507
DOI: doi:10.1257/aer.20151507
ISSN: 0002-8282
EISSN: 1944-7981
Pages: 1 - 37
Type of Material: Journal Article
Journal/Proceeding Title: American Economic Review
Version: Final published version. Article is made available in OAR by the publisher's permission or policy.

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