Spatial Hysteresis” with Michael Amior (Hebrew University) and Axel Gottfries (University of Edinburgh).

Abstract:

We study the role of mobility costs in the persistence of labor market outcomes across space. We provide an analytical characterization of the aggregate dynamics of a canonical model with a homogeneous mobility cost. When calibrated to mobility flows, spatial disparities, and local labor demand and supply elasticities, the model underpredicts spatial persistence, and misses the pattern of mobility across space. We then study the role of heterogeneity in mobility costs in resolving these tensions. A key contribution is that we are able to characterize analytically the model with heterogeneous costs. Thus extended, the model captures spatial persistence, the presence of churn in growing locations, history-dependence in spatial disparities, and a nuanced form of equilibrium segregation whereby locations further down the hierarchy become increasingly comprised by similar (immobile) types.