Working Paper: NBER ID: w21618
Authors: Andrew Foote; Michel Grosz; Ann Huff Stevens
Abstract: Large shocks to local labor markets can cause long-lasting changes to employment, unemployment and the local labor force. This study examines the relationship between mass layoffs and the long-run size of the local labor force. It considers four main channels through which the local labor force may adjust: in-migration, out-migration, retirement, and disability insurance enrollment. We show that these channels account for over half of the labor force reductions following a mass layoff event. By measuring the residual difference between these channels and net labor force change, we also show that labor force non-participation accounted for much of the local labor force response in the period during and after the Great Recession.
Keywords: mass layoffs; labor market response; migration; disability insurance; retirement
JEL Codes: H55; J01; J63; R23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Mass layoffs (J63) | County labor force size (J21) |
| Mass layoffs (J63) | Outmigration rates (F22) |
| Mass layoffs (J63) | Inmigration rates (J11) |
| Mass layoffs (J63) | Labor force exits (J63) |
| Mass layoffs (J63) | Nonparticipation (J22) |
| Mass layoffs (J63) | Disability insurance enrollment (G52) |
| Mass layoffs (J63) | Retirement (J26) |