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Local Labor Markets and Human Capital Investments

Russell Weinstein ()

No 10598, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: I study whether human capital investments are based on local rather than national demand, and whether this is explained by migration or information frictions. I analyze three sector-specific shocks with differential local effects, including the dot-com crash, the 2008 financial crisis, and a shock transforming Delaware into an international financial center. I find universities in areas more exposed to sectoral shocks experience greater changes in sector-relevant majors. Using rich student-level data, I find this is not explained by information frictions, but more likely by migration frictions. The results suggest encouraging human capital investments based on national demand may increase mismatch.

Keywords: college major choice; local labor markets; migration frictions; information frictions (search for similar items in EconPapers)
JEL-codes: J24 I20 R12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lma and nep-ure
Date: 2017-02
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