Local Shocks And Internal Migration

Migration is a key mechanism through which local labor markets adjust to economic shocks. In this paper, we analyze the migration response of American workers to two of the most important shocks that hit US manufacturing since the 1990s: Chinese import competition and the introduction of industrial robots. Exploiting plausibly exogenous variation in exposure across US local labor markets over time, we establish a new fact. Even though both shocks drastically reduced employment in the manufacturing sector, only robots led to a sizable decline in population size. We provide evidence that negative employment spillovers outside manufacturing, caused by robots but not by Chinese imports, can explain the different migration responses. We interpret our findings through the lens of a model that highlights two mechanisms: the cost savings that each shock provides and the degree of complementarity between directly and indirectly exposed industries.