The Labor Mobility Slowdown: Origins and Macro Implications.

Abstract

Geographical labor mobility has been a crucial margin of adjustment of the US labor market in response to local shocks. However, migration rates have been steadily declining since the 1990s. Consistent with the literature, I show that this decline is robust across various socioeconomic groups and is not driven by composition changes, and it is strongly associated with the observed decline in employment dynamism. Furthermore, I provide novel evidence that the response of migration to local economic shocks has substantially decreased during the same period. I develop a model with heterogeneous workers and locations and argue that rising worker-job specialization can account for these changes. These findings have implications for coordinating stabilization policy in a large monetary union like the US.