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Title: Labor Market Conflict and the Decline of the Rust Belt

Citation Type: Miscellaneous

Publication Year: 2017

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Abstract: No region of the United States fared worse over the postwar period than the Rust Belt, the heavy manufacturing region bordering the Great Lakes. This paper hypothesizes that the Rust Belt declined in large part due to the persistent labor market conflict which was prevalent throughout the Rust Belts main industries. We formalize this thesis in a two-region dynamic general equilibrium model in which labor market conflict leads to a hold-up problem in the Rust Belt that reduces investment and productivity growth and leads employment to move from the Rust Belt to the rest of the country. Quantitatively, the model accounts for much of the large secular decline in the Rust Belts employment share before the 1980s, and its relative stabilization since then, once labor conflict decreased. The model also includes a foreign sector to assess the alternative hypothesis that higher imports were behind the Rust Belts decline. This hypothesis is inconsistent with the timing of the Rust Belts decline.

Url: http://www3.nd.edu/~salder/RB-slides.pdf

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Authors: Alder, Simeon; Lagakos, David; Ohanian, Lee

Publisher: Notre Dame

Data Collections: IPUMS USA, IPUMS CPS

Topics: Labor Force and Occupational Structure

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