Full Citation

Title: Manufacturing Busts, Housing Booms, and Declining Employment: A Structural Explanation

Citation Type: Miscellaneous

Publication Year: 2012

ISBN:

ISSN:

DOI:

NSFID:

PMCID:

PMID:

Abstract: This paper studies the extent to which the housing boom and subsequent housing bust within the U.S. during the 2000s masked (and then subsequently unmasked) the sharp, ongoing decline in the manufacturing sector. We exploit cross-city variation in manufacturing declines and housing booms during the 2000-2007 period, and we jointly estimate the effect of both types of shocks on local employment and wages. Focusing on the 2000-2007 period, we find that a one standard deviation negative manufacturing shock increases the non-employment rate of non-college-educated men by 1 percentage point, and we find that a one standard deviation positive housing price shock reduces the non-employment rate for this group by 1.2 percentage points, enough to fully offset the effects of the adverse manufacturing shock. Roughly half of the "offsetting" appears to come from increased construction employment, with the remainder coming through other sectors that are affected by shocks to local housing prices. We find that other demographic groups are affected by both of these shocks to a lesser extent. Finally, we use these estimates to construct counter factuals assessing how aggregate employment would have evolved during the 2000s absent the housing boom/bust cycle, and we find that roughly 40 percent of the increasein non-employment between 2007 and 2011 can be attributed to the decline in manufacturing employment that occurred within the U.S. during the 2000s. In particular, we find that much of the recent increase in non-employment would have occurred earlier had it not been for the large temporary boom in local housing prices.

User Submitted?: No

Authors: Notowidigdo, Matthew J.; Hurst, Erik; Charles, Kerwin Kofi

Publisher: University of Chicago

Data Collections: IPUMS USA

Topics: Housing and Segregation, Labor Force and Occupational Structure, Other

Countries: