The Unassuming Economist

The United States has always been regarded as a highly mobile society. Previous work has left the impression that when adverse economic shocks hit their cities or regions, Americans are quickly able to move and find jobs elsewhere within the country. In a new paper, Mai Dao, Davide Furceri and I provide new evidence that questions this view. Our evidence shows that the ability to migrate is not as immediate as previously supposed; in the first year or two after an adverse shock to a state, the bulk of the burden is borne by an increase in the state unemployment and a decline in its labor force participation rate. We also find that while net mobility across states picks up during national recessions, this increase is driven more by a stronger population inflow into states that are doing better rather than stronger population outflow from states that are doing worse; the outflow occurs only toward the end of the recession. Overall, therefore, our results offer a less sanguine view of the ability of U.S. workers to shield themselves from the consequences of adverse shocks than is available in the literature. Here is a link to the paper and to an online appendix which is a wonk’s delight.