Economic Diversity and the Resilience of Cities

François de Soyres, Simon Fuchs, Illenin Kondo and Helene Maghin

No 2025-2, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

Abstract: We show how local worker flow adjustment margins yield a theory-consistent sufficient statistic approximating the welfare effects of local shocks. Furthermore, we isolate a city's insurance value as this approximation's second-order term. Leveraging rich labor flows data across occupations, industries, and cities in France, we estimate spatial and nonspatial flows responses to local labor demand shocks. Less economically diverse French cities experience deeper contractions in gross outflows following negative shocks. In contrast, more economic concentration begets a modestly larger increase in gross worker flows following positive shocks. Altogether, we uncover sizable welfare insurance gains from local economic diversity.

Keywords: sufficient statistic; labor flows; concentration; economic diversity; welfare (search for similar items in EconPapers)
JEL-codes: J21 J61 J62 (search for similar items in EconPapers)
Pages: 33
Date: 2025-03-25
New Economics Papers: this item is included in nep-eur and nep-lab
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Published in 2025

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Related works:
Working Paper: Economic Diversity and the Resilience of Cities (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedawp:101192

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DOI: 10.29338/wp2025-02

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