Local Employment Multipliers in U.S. cities

Nov 2014 | 730

Authors: Jasper van Dijk

This paper shows that within a regional economy, employment in the nontradable sector benefits from attracting jobs in the tradable sector.  I rework Moretti's study of U.S. cities (AER 2010) and find that one new job in a given city's tradable sector will result into 1.02 new jobs in the nontradable sector in the same city.  I show Moretti overestimated the size of this local multiplier by 0.57, because he made five perfunctory assumptions that had a major impact on his results.  Subsequently I show that Moretti's assertion that skilled tradable jobs have a larger multiplier than unskilled tradable jobs is not supported by the data.  The evidence provided by Moretti was only significant due to an endogeneity effect.

Keywords: Local labour market, multiplier, tradable, nontradable

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