Local Labor Markets Should Be Redefined: New Definitions Based on Estimated Demand-Shock Spillovers

Authors

Timothy J. Bartik, W.E. Upjohn Institute for Employment ResearchFollow

Upjohn Author ORCID Identifier

https://orcid.org/0000-0002-6238-8181

Publication Date

10-29-2024

Series

Upjohn Institute working paper ; 24-407

DOI

10.17848/wp24-407

Abstract

This paper provides estimates that lead to better U.S. labor market definitions. Current U.S. labor market definitions—for example, metropolitan areas and commuting zones—are unsatisfactory because they are ad hoc and usually do not correspond to commonly used local planning areas. This paper proposes basing U.S. labor market definitions on how a job shock to a county affects nearby counties’ employment rates. New estimates of county spillovers are presented. Using these estimated spillovers, new multicounty labor market definitions are based on maximizing a weighted sum of total spillovers captured, versus taking the average size of within-market effects. These new “spillover-defined local labor markets” (SLMs) correspond more closely to commonly used local planning areas, and they better capture spillovers and commuting flows without becoming excessively large.

Issue Date

October 2024

Subject Areas

LABOR MARKET ISSUES; ECONOMIC DEVELOPMENT; Local labor markets; Regional policy and planning; Regional collaboration; Transportation and infrastructure; WORKFORCE DEVELOPMENT