Full Citation

Title: Local Multiplier Effects

Citation Type: Miscellaneous

Publication Year: 2017

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Abstract: The theory of local economics suggests that each time a job is added into the local economy, additional jobs may be created locally due to the increase in demand for local goods and services. The magnitude of the local multiplier at very local (neighborhood) level is theoretically ambiguous, because workers do not necessarily choose to settle and consume local goods and services around the neighborhoods in which they work. This is further demonstrated by the fact that city-wide labor demand shock generates heterogeneous multipliers across neighborhoods. In this paper, I empirically estimate the neighborhood-level multiplier in response to local employment demand shocks. I exploit the sources of variation for local demand shocks from large revenue growth of large Compustat companies. I show that local labor demand shocks from Compustat headquarters have positive impact on employment in nontradable goods and services in the immediate vicinity, and the effect is larger in initially poorer neighborhoods. Currently, I am in the process of obtaining access to Longitudinal Business Database (LBD) at the U.S. Census RDC facility, which would give me employment and payroll information on the universe of all businesses in the U.S.. With LBD data, I will evaluate the local multipliers using growth episodes in both Compustat Örms and Inc. 500 fastest growing young private companies.

Url: http://web.stanford.edu/~suyichen/localmultiplier.pdf

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Authors: Su, Yichen

Publisher: Stanford University

Data Collections: IPUMS USA, IPUMS NHGIS

Topics: Labor Force and Occupational Structure, Other

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