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Zbwleibniz-Informationszentrum A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Braun, Sebastian; Kramer, Anica; Kvasnicka, Michael Working Paper Local labor markets and the persistence of population shocks Ruhr Economic Papers, No. 712 Provided in Cooperation with: RWI – Leibniz-Institut für Wirtschaftsforschung, Essen Suggested Citation: Braun, Sebastian; Kramer, Anica; Kvasnicka, Michael (2017) : Local labor markets and the persistence of population shocks, Ruhr Economic Papers, No. 712, ISBN 978-3-86788-831-8, RWI - Leibniz-Institut für Wirtschaftsforschung, Essen, http://dx.doi.org/10.4419/86788831 This Version is available at: http://hdl.handle.net/10419/170699 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu RUHR ECONOMIC PAPERS Sebastian Till Braun Anica Kramer Michael Kvasnicka Local Labor Markets and the Persistence of Population Shocks #712 Imprint Ruhr Economic Papers Published by RWI Leibniz-Institut für Wirtschaftsforschung Hohenzollernstr. 1-3, 45128 Essen, Germany Ruhr-Universität Bochum (RUB), Department of Economics Universitätsstr. 150, 44801 Bochum, Germany Technische Universität Dortmund, Department of Economic and Social Sciences Vogelpothsweg 87, 44227 Dortmund, Germany Universität Duisburg-Essen, Department of Economics Universitätsstr. 12, 45117 Essen, Germany Editors Prof. Dr. Thomas K. Bauer RUB, Department of Economics, Empirical Economics Phone: +49 (0) 234/3 22 83 41, e-mail: [email protected] Prof. Dr. Wolfgang Leininger Technische Universität Dortmund, Department of Economic and Social Sciences Economics – Microeconomics Phone: +49 (0) 231/7 55-3297, e-mail: [email protected] Prof. Dr. Volker Clausen University of Duisburg-Essen, Department of Economics International Economics Phone: +49 (0) 201/1 83-3655, e-mail: [email protected] Prof. Dr. Roland Döhrn, Prof. Dr. Manuel Frondel, Prof. Dr. Jochen Kluve RWI, Phone: +49 (0) 201/81 49-213, e-mail: [email protected] Editorial Office Sabine Weiler RWI, Phone: +49 (0) 201/81 49-213, e-mail: [email protected] Ruhr Economic Papers #712 Responsible Editor: Thomas K. Bauer All rights reserved. Essen, Germany, 2017 ISSN 1864-4872 (online) – ISBN 978-3-86788-831-8 The working papers published in the Series constitute work in progress circulated to stimulate discussion and critical comments. Views expressed represent exclusively the authors’ own opinions and do not necessarily reflect those of the editors. Ruhr Economic Papers #712 Sebastian Till Braun, Anica Kramer, and Michael Kvasnicka Local Labor Markets and the Persistence of Population Shocks Bibliografische Informationen der Deutschen Nationalbibliothek Die Deutsche Bibliothek verzeichnet diese Publikation in der deutschen National- bibliografie; detaillierte bibliografische Daten sind im Internet über: http://dnb.d-nb.de abrufbar. Das RWI wird vom Bund und vom Land Nordrhein-Westfalen gefördert. http://dx.doi.org/10.4419/86788831 ISSN 1864-4872 (online) ISBN 978-3-86788-831-8 Sebastian Till Braun, Anica Kramer, and Michael Kvasnicka1 Local Labor Markets and the Persistence of Population Shocks Abstract This paper studies the persistence of a large, unexpected, and regionally very unevenly distributed population shock, the inflow of eight million ethnic Germans from Eastern Europe to West Germany after World War II. Using detailed census data from 1939 to 1970, we show that the shock had a persistent effect on the distribution of population within local labor markets, but only a temporary effect on the distribution between labor markets. These results suggest that locational fundamentals determine population patterns across but not within local labor markets, and they can help to explain why previous studies on the persistence of population shocks reached such different conclusions. JEL Classification: J61, R12, R23, N34 Keywords: Population shock; locational fundamentals; agglomeration economies; regional migration; postwar Germany October 2017 1 Sebastian Till Braun, IfW Kiel and University of St. Andrews, Scotland; Anica Kramer, RWI and RUB; Michael Kvasnicka, Otto von Guericke University Magdeburg, RWI, and IZA. – This paper has benefited from comments by Thomas Bauer, Dávid Krisztián Nagy and participants at RWI, the 2017 EALE Conference, the 2016 RGS/ RWI Workshop on the Economics of Migration, and the 2016 Spring Meeting of Young Economists. Kathleen Kürschner, Yue Huang, and Anja Rösner have provided valuable research assistance in collecting and processing various historical data for different sub-national administrative regions in Germany. The research in this paper was funded by Deutsche Forschungsgemeinschaft (grant no. BR 4979/1-1, “Die volkswirtschaftlichen Effekte der Vertriebenen und ihre Integration in Westdeutschland, 1945-70”). Any remaining errors are our own.– All correspondence to: Anica Kramer, RWI, Hohenzollernstr. 1/3, 45128 Essen, Germany, e-mail: anica.kramer@ rwi-essen.de 1 Introduction We study the persistence of a very large population shock, the inflow of eight million displaced Germans (expellees) from Eastern Europe to West Germany after World War II. This population shock hit West German counties very unequally, with expellee inflow rates ranging from 1.4% of the pre-war population to as much as 83%. We show that this migration-induced regional population shock had a persistent effect on the distribution of population within inter-connected labor markets, but only a temporary effect on the distribution of population between labor markets. Our findings can help to explain the disparate results in the growing empirical literature on the persis- tence of population shocks. This literature exploits population shocks to gauge the relative importance of the two main explanations put forward for the spatial distribution of economic activity, locational funda- mentals and increasing returns.1 The locational fundamentals’ theory holds that long-lasting geographic conditions, such as access to a river, determine the spatial distribution of economic activity. Consequently, shocks to the spatial distribution of population should have only temporary effects on regional population patterns. Policy makers, as a consequence, have little scope to affect the spatial distribution of economic activity, as locational fundamentals are typically hard to change (see e.g. Head and Mayer, 2003). The in- creasing returns theory, in contrast, suggests that population density itself may enhance productivity because of agglomeration economies. According to this second theory, therefore, policies and shocks to the distri- bution of economic activity could well have long-run consequences if they are large enough to move the economy from one equilibrium to another (see Henderson, 1974; Krugman, 1991, for seminal theoretical contributions). Empirical studies exploring these explanations have produced diverging results. A first set of studies shows that bombings during World War II had no persistent effect on city size in Japan (Davis and Weinstein, 2002) and West Germany (Brakman et al., 2004). Furthermore, Davis and Weinstein (2008) find that the industrial structure of Japanese cities also recovered quickly to its pre-war pattern. The findings of this first set of studies provide empirical support for the locational fundamentals theory, which predicts that temporary shocks have only temporary effects. A distinctive feature of these studies is that they typically use larger cities as their unit of observation.2 This is of importance for the argument developed in this paper, since larger cities are usually located in different regional labor markets. A second set of studies, in contrast, finds that migration-induced population shocks during and after World War II were highly persistent. Sarvimaki¨ (2011) shows that the inflow of forced migrants into rural areas of Finland had a re-inforcing effect on post-war population growth, and Schumann (2014), focusing on the West German state of Baden-Wurttemberg,¨ shows that expellee inflows had a persistent effect on municipality size. Similarly, Eder and Halla (2016) find that inner-Austrian migration out of the (temporary) Soviet occupation zone still affects the spatial distribution of population in Austria today. The findings of this second set of studies hence suggest that locational fundamentals do not determine long-run population 1See Redding (2010) for a general overview of the existing empirical literature on new economic geography, including the empirical
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