Title: Local open economies within the U.S
Description: "A series of studies has found that relative wages and employment  rates in different local labor markets of the US are surprisingly unaffected by  local factor supplies.  This paper evaluates two explanations for this puzzling  empirical fact: (1) Interregional trade mitigates the local impact of supply  shocks.  (2) Production technology rapidly adapts to the local mix of workers.   The author tests these alternative explanations by estimating the effect of  increases in relative supplies of particular skill groups on the relative  growth rates of different industries and on the relative utilization of these  skill groups within industries.  Labor supply shocks are identified with a  component of foreign immigration driven by the historical regional settlement  patterns of immigrants from different countries.  Using establishment-level  output and capital stock data from the Longitudinal Research Database,  augmented with employment and labor force data from the 1980 and 1990 Censuses  of Population, changes in local labor supply during the 1980s are shown to have  had little influence on local industry mix.  Instead, citywide increases in the  relative supply of a particular skill group lead to increases in relative  factor intensity, with little or no effect on relative wages.  These patterns  suggest that industries adapt their use of labor inputs to local supplies, as  predicted by theoretical models of endogenous technological change.  Consistent  with this interpretation, on-the-job computer use expanded most rapidly over  the 1980s in cities where the relative supply of educated labor grew  fastest"--Federal Reserve Bank of Philadelphia web site.
Subjects: Emigration and immigration, Industries, Labor supply
Places: United States