Employment Dynamics in Local Labor Markets: Evidence from U.S. Post Cold War Base Closures

摘要

Local labor market adjustment to exogenous demand changes is studied in the context of the closure of U.S. military bases between 1991 and 1999. This post Cold War episode provides for a natural experiment with evidence to inform policy on the labor market impact of defense spending cycles. The results are consistent with both search and declining sector wage rigidity increasing adjustment costs and are generally not consistent with market intervention theories of long duration unemployment.