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Title: Upstream Volatility Spillovers from Geographically Concentrated Production

Citation Type: Working Paper

Publication Year: 2021

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Abstract: As US income inequality increased, labor-intensive production became more concentrated into lower-wage regions. While economically profitable, the higher concentration can lead to more volatile firm outcomes. Using federally-mandated minimum wage increases as a quasi-natural experiment, we show that the increase in the federal minimum wage in states where the state minimum is bound to the federal mandate tempers the concentration. As a result, the profit volatilities of downstream firms in treated states decrease. We find that a one dollar increase in the federal minimum wage leads to a 3.63 percentage point decrease in production concentration in bound states, which is then associated with a 24.4% decrease in profit volatility of customer firms in those states. Our findings highlight the volatility spillover cost born by firms dependent on geographically concentrated production.

Url: https://www.vgsf.ac.at/fileadmin/vgsf/Papers/Archive/FRS_2020-21/20210617_FRS_Moyen.pdf

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Authors: Moon, S. Katie; Moyen, Nathalie

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Pages: 1-47

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Data Collections: IPUMS CPS

Topics: Population Mobility and Spatial Demography, Poverty and Welfare

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