Local Ties in Spatial Equilibrium

Mike Zabek

No 2019-080, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: If someone lives in an economically depressed place, they were probably born there. The presence of people with local ties - a preference to live in their birthplace - leads to smaller migration responses. Smaller migration responses to wage declines lead to lower real incomes and make real incomes more sensitive to subsequent demand shocks, a form of hysteresis. Local ties can persist for generations. Place-based policies, like tax subsidies, targeting depressed places cause smaller distortions since few people want to move to depressed places. Place-based policies targeting productive places increase aggregate productivity, since they lead to more migration.

Keywords: Migration; Decline; Economic development, technological change, and growth; Labor and demographic economics; Local labor markets (search for similar items in EconPapers)
JEL-codes: D61 E62 H31 J11 J61 R23 R58 (search for similar items in EconPapers)
Pages: 71 pages
Date: 2019-11-18
New Economics Papers: this item is included in nep-geo, nep-lab, nep-mac, nep-mig and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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https://www.federalreserve.gov/econres/feds/files/2019080pap.pdf (application/pdf)

Related works:
Journal Article: Local Ties in Spatial Equilibrium (2024)
Working Paper: Local Ties in Spatial Equilibrium (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2019-80

DOI: 10.17016/FEDS.2019.080

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