Local Labor Markets and Human Capital Investments
82 Pages Posted: 11 Mar 2017
Abstract
I study whether human capital investments are based on local rather than national demand, and whether this is explained by migration or information frictions. I analyze three sector-specific shocks with differential local effects, including the dot-com crash, the 2008 financial crisis, and a shock transforming Delaware into an international financial center. I find universities in areas more exposed to sectoral shocks experience greater changes in sector-relevant majors. Using rich student-level data, I find this is not explained by information frictions, but more likely by migration frictions. The results suggest encouraging human capital investments based on national demand may increase mismatch.
Keywords: college major choice, local labor markets, migration frictions, information frictions
JEL Classification: J24, I20, R12
Suggested Citation: Suggested Citation