Year

2017

Series

Upjohn Institute working paper ; 17-276

DOI

10.17848/wp17-276

Abstract

This paper analyzes an important shock to local labor demand in the financial services sector: firm relocation to Delaware following a Supreme Court ruling and state legislation in the 1980s. Using synthetic controls and bordering states, I find significant effects on employment growth, the unemployment rate, and participation in the first decade. Employment spillovers to the nontradable sector and migration appear larger than estimates from shocks to the tradable sector. Effects persist for 10 to 20 years after Delaware loses its original policy-induced advantage. The shift towards a low unemployment sector explains this persistence, rather than direct productivity effects or agglomeration.

Issue Date

May 2017

Sponsorship

W.E. Upjohn Institute for Employment Research, Early Career Research Award 15-150-14

Subject Areas

ECONOMIC DEVELOPMENT; Local labor markets

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Citation

Weinstein, Russell. 2017. "Dynamic Responses to Labor Demand Shocks: Evidence from the Financial Industry in Delaware." Upjohn Institute Working Paper 17-276. Kalamazoo, MI: W.E. Upjohn Institute for Employment Research. https://doi.org/10.17848/wp17-276