Job loss and regional mobility
New published paper in Journal of Labor Economics: "Job loss and regional mobility" by Kristiina Huttunen (Aalto University School of Economics and IZA), Jarle Møen (NHH) and Kjell Gunnar Salvanes.
Displaced workers suffer earnings losses
In the newly published paper "Job loss and regional mobility" Huttunen, Møen and Salvanes study the migration behavior of displaced workers in Norway to understand why workers who have lost their jobs in plant closures or mass layoffs suffer significant and long-lasting employment and earnings losses.
Costs of moving may vary as a result of family commitments, networks, and preferences regarding local amenities and while the literature on both migration and job displacement is large, we know little specifically about the migration behavior of displaced workers and how they fare in the labor market. Little is also known about how location-specific amenities, such as family ties, affect mobility.
In this paper Salvanes and co-authors look into what the effect of job loss on the likelihood of moving is, what determines the choice to move after a job loss and if earnings losses after job loss differ between movers and stayers.
Amenities affect mobility
Job opportunities drive mobility decisions and some strands of the literature suggest that the decision to move is affected by location-specific amenities. These amenities could be access to cultural events in urban areas, but they also could be nature and clean air in rural areas.
The extended Rosen-Roback spatial equilibrium model in terms of tastes for amenities suggests that individuals differ with respect to preferences for these local amenities and that these differences can explain worker selection into mobility after local shocks.
The presence of extended family members can be thought of as one such amenity that affects both the cost of moving and the expected gains. Parents may influence workers’ employment and earnings directly through their networks, parents may help bring up grandchildren, or parents may be elderly and in need of care. Siblings may represent a positive incentive for colocation for much the same reasons as parents, but having siblings can also make it easier to move away from elderly parents since siblings are substitute caretakers. The job loss of a worker or his spouse affects migration propensity by exogenously decreasing the opportunity costs of moving.
Family ties are important
Salvanes and co-authors are interested in better understanding the motives for moving and how the decision-making process might differ between different types of workers. They expect labor market outcomes to differ among workers who move for different reasons and split the sample by gender and postmove location characteristics, such as urban status and the existence of family members. They also explore how job loss and migration interact with fertility, marital status, and disability.
Huttunen, Møen and Salvanes find that noneconomic factors, such as family ties, are very important for the migration decision and that there is strong heterogeneity in outcomes. They find large income losses for workers who move to regions where they have family or to rural areas, while, for example, rural to urban movers realize a significant long-term earnings increase. They also find that life events related to fertility, divorce, and new relationships correlate with mobility after job loss and may partly explain the large income losses.