Every recession since 1973 has led to a persistent decrease in earnings per capita in local areas where the recession was particularly severe. The consequences of this finding depend on why recessions lead to persistent declines in local economic activity. Local economic activity could decline because high-income workers are more likely to migrate away from places experiencing large negative economic shocks, or because employers change their production process or shut down. Although a large literature documents the consequences of recessions, we know less about why recessions lead to persistent declines in some local areas.
Economists Brad Hershbein and Bryan Stuart will examine how recessions can lead to enduring effects on earnings inequality both within and across different areas. They will analyze restricted-access data from the U.S. Census Bureau’s Longitudinal Employer-Household Dynamics (LEHD) program and merge it with proprietary third-party data from Burning Glass Technologies on electronic job postings to study these effects across approximately 400 commuting zones.