Working Paper: NBER ID: w24548
Authors: Benjamin A. Austin; Edward L. Glaeser; Lawrence H. Summers
Abstract: The economic convergence of American regions has greatly slowed, and rates of long-term non-employment have even been diverging. Simultaneously, the rate of non-employment for working age men has nearly tripled over the last 50 years, generating a terrible social problem that is disproportionately centered in the eastern parts of the American heartland. Should more permanent economic divisions across space lead American economists to rethink their traditional skepticism about place-based policies? We document that increases in labor demand appear to have greater impacts on employment in areas where not working has been historically high, suggesting that subsidizing employment in such places could particularly reduce the not working rate. Pro-employment policies, such as a ramped up Earned Income Tax Credit, that are targeted towards regions with more elastic employment responses, however financed, could plausibly reduce suffering and materially improve economic performance.
Keywords: place-based policies; employment; non-employment; economic disparities
JEL Codes: J01; J21; J38; R12; R23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increases in labor demand (J23) | employment (J68) |
| industrial composition Bartik shocks (L61) | non-employment rates (J69) |
| Chinese import exposure (F14) | non-employment rates (J69) |
| military spending shocks (H56) | non-employment rates (J69) |