Why Aren’t People Leaving Janesville? Industry Persistence, Trade Shocks, and Mobility

Abstract

Particular industries have dominated many locations in the United States for more than a century. We show that individuals residing in such locations were systematically less likely to move away from there during the past few decades. By identifying locations with sizable employment shares in the same manufacturing industries in 1870 and 1980, we documented less out-migration in the decades following 1980 than earlier. In response to the largest shock affecting manufacturing employment since then, these locations adjusted differently: the "China shock" led to higher unemployment in their communities, but fewer people moved away. Drawing on rich data of social links across counties and surveys of individuals residing there, we document that these individuals have stronger local friendship networks than residents of more thriving communities and exhibit systematic differences in their job-market search behavior. We hypothesize that when local opportunities narrow, residents of these locations both lack information about job opportunities elsewhere and benefit from the amenity value of extended social networks in their location of origin. Instrumental variable results based on a historical shock to local industries' chances of survival suggest that the effect of dominant manufacturing industries on migration is causal. Mediation analysis reveals that the emergence of strong local ties primarily drives such migration.