Why Aren't People Leaving "Janesville?" Industry Persistence, Trade Shocks, and Mobility
Early Career Research Award
We examine what makes cities resilient to competition by combining city-industry employment and labor market outcomes from the late 19th century and today. We find that cities, which recorded employment in the same industries for the past century, are slower in adjusting to the China shock. Facing foreign competition, out-migration is slower in these cities than in comparable cities, which experienced industrial churning throughout the 20th century, while unemployment increased. Using value surveys and data of local labor market flows, we argue that the existence of the same industries throughout a century, which offered low-skill jobs in these cities, shaped local identities. This increased the cost of out-migration and the local population’s willingness to switch sectors in face of external shocks. To account for the potential positive selection of workers in cities offering stable low-skill jobs, we employ a shock to low-skilled industries at the beginning of American industrialization. Local competition from convict labor made low-skilled production unprofitable in some community zones that happened to be close to a prison adopting it. We show that in community zones that lost low-skilled industries at the turn of the 20th century, workers upgraded their skills and moved out, making those locations resilient to weathering the China shock of the early 21st.