Dynamic responses to labor demand shocks: Evidence from the financial industry in Delaware

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in ABSTRACTThis paper analyzes an important shock to local labor demand in the financial services sector: firm relocation to Delaware following a Supreme Court ruling and state legislation in the 1908s. Using synthetic controls and bordering states, I find significant effects on employment growth, the unemployment rate, and participation in the first decade. Employment spillovers to the nontradable sector and migration appear larger than estimates from shocks to the tradable sector. Effects persist for 10 to 20 years after Delaware loses its original policy-induced advantage. The shift towards a low unemployment sector explains this persistence, rather than direct productivity effects or agglomeration. JEL Classification Codes: R10, J20, G20Key Words: Labor demand shocks, regulatory competition, migration, local labor markets Acknowledgments:I am grateful to Kevin Lang, Daniele Paserman, and Johannes Schmieder for many helpful conversations. I am also thankful to Peter Ganong, Theresa Gutberlet, Walker Hanlon, Shawn Kantor, Enrico Moretti, Matt Notowidigdo, Ken Simons, Alex Whalley, and seminar participants at Rensselaer Polytechnic Institute, University at Albany, the University of Illinois at UrbanaChampaign, the Montreal Applied Economics Workshop, the RPI Conference on Regional Economic Growth, and the Urban Economics Association Annual Conference for useful comments. I thank Larry Katz for providing data on state unemployment rates before 1976, and David Swayze for useful institutional knowledge. I acknowledge financial support from the W.E. Upjohn Institute for Employment Research. Abstract This paper analyzes an important shock to local labor demand in thenancial services sector: rm relocation to Delaware following a Supreme Court ruling and state legislation in the 1980s. Using synthetic controls and bordering states, I nd signicant eects on employment growth, the unemployment rate, and participation in the rst decade. Employment spillovers to the nontradable sector and migration appear larger than estimates from shocks to the tradable sector. Eects persist for 10 to 20 years after Delaware loses its original policyinduced advantage. The shift towards a low unemployment sector explains this persistence, rather than direct productivity eects or agglomeration.JEL classication codes: R10, J20, G20

Do Tax Incentives Affect Business Location and Economic Development? Evidence from State Film Incentives

“…There are also several independent reports that estimate the return-on-investment of SFIs, showing that SFIs generate only some tax revenue for the state, such as 16-18¢per dollar spent in Louisiana (Albrecht, 2005) and 14.4¢ĩn New Mexico (Popp and Peach, 2008). man 2015) but are in contrast to studies that do find meaningful effects (e.g., Bartik 1985;Bartik 1989;Walker and Greenstreet 1991;Papke 1991;Wu 2008;Krupka and Noonan 2009;Freedman 2013;Strauss-Kahn and Vives 2009;Rogers and Wu 2012;Moretti and Wilson 2014;Weinstein 2018). Given that this case study of state film incentives is one where one would expect large effects, the conclusions of this study tip the non-consensus (Wasylenko 1999 2005 2000 1995 1990 1985 1980 1975 Year Active SFI Repealed SFI…”

Do tax incentives affect business location and economic development? Evidence from state film incentives

“…There are also several independent reports that estimate the return-on-investment of SFIs, showing that SFIs generate only some tax revenue for the state, such as 16-18¢per dollar spent in Louisiana (Albrecht, 2005) and 14.4¢ĩn New Mexico (Popp and Peach, 2008). man 2015) but are in contrast to studies that do find meaningful effects (e.g., Bartik 1985;Bartik 1989;Walker and Greenstreet 1991;Papke 1991;Wu 2008;Krupka and Noonan 2009;Freedman 2013;Strauss-Kahn and Vives 2009;Rogers and Wu 2012;Moretti and Wilson 2014;Weinstein 2018). Given that this case study of state film incentives is one where one would expect large effects, the conclusions of this study tip the non-consensus (Wasylenko 1999 2005 2000 1995 1990 1985 1980 1975 Year Active SFI Repealed SFI…”

Local Labor Markets and Human Capital Investments

“…See appendix for regression specication and details. 42 The coecients on Dist_r * T reatY ears1 (not shown) and Dist_r * T reatY ears1 * BP lus suggest the total change for local, high GPA students is fairly similar across distance group. 43 These eects are not part of a pre-policy trend, and the results for business majors are in the opposite direction of the pre-policy trend.…”

“…As a result, many companies moved their nance or credit operations to Delaware, starting with J.P. Morgan in 1981. Weinstein (2017) shows the policy resulted in higher levels of Finance, Insurance, and Real Estate (FIRE) growth in Delaware through 2000. Figure 1 Panel C, reproduced from Weinstein (2017) (Agulnick 1999).…”

“…Weinstein (2017) shows the policy resulted in higher levels of Finance, Insurance, and Real Estate (FIRE) growth in Delaware through 2000. Figure 1 Panel C, reproduced from Weinstein (2017) (Agulnick 1999). As discussed in the appendix, the change in majors is unlikely directly due to increased corporate funding of the sector-relevant departments, since this funding did not occur immediately after the shock.…”