Economic Diversity and the Resilience of Cities

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

No 106, Opportunity and Inclusive Growth Institute Working Papers from Federal Reserve Bank of Minneapolis

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 non-spatial 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 a sizable welfare insurance gains from local economic diversity.

Keywords: Sufficient statistics; Welfare; Concentration; Economic diversity; Labor flows (search for similar items in EconPapers)
JEL-codes: J21 J61 J62 (search for similar items in EconPapers)
Date: 2024-11-22
New Economics Papers: this item is included in nep-eur, nep-geo, nep-lab and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmoi:99165

DOI: 10.21034/iwp.106

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