François de Soyres, Simon Fuchs, Illenin O. Kondo, and Helene Maghin
Working Paper 2025-2
March 2025
Full text
Abstract:
We show how local worker flow adjustment margins yield a theory-consistent sufficient statistic approximating the welfare effects of local shocks. Furthermore, we isolate a city's insurance value as this approximation's second-order term. Leveraging rich labor flows data across occupations, industries, and cities in France, we estimate spatial and nonspatial flows responses to local labor demand shocks. Less economically diverse French cities experience deeper contractions in gross outflows following negative shocks. In contrast, more economic concentration begets a modestly larger increase in gross worker flows following positive shocks. Altogether, we uncover sizable welfare insurance gains from local economic diversity.
JEL classification: J61, J62, J21
Key words: sufficient statistic, labor flows, concentration, economic diversity, welfare
https://doi.org/10.29338/wp2025-02
The authors thank Stefan Faridani, Kim Ruhl, and seminar participants at the UEA North America meeting and SEA annual meeting for very helpful comments. The views expressed here are those of the authors and not necessarily those of the Board of Governors of the Federal Reserve System, the Federal Reserve Bank of Atlanta, the Federal Reserve Bank of Minneapolis, or any other person associated with the Federal Reserve System. Any remaining errors are the authors' responsibility.
François de Soyres is with the Federal Reserve Board of Governors. Simon Fuchs is with the Federal Reserve Bank of Atlanta. Illenin O. Kondo is with the Federal Reserve Bank of Minneapolis. Helene Maghin is with KU Leuven. Please address questions regarding content to Simon Fuchs, Federal Reserve Bank of Atlanta, 1000 Peachtree Street NE, Atlanta, GA 30309.
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