Local Multipliers

Every time a local economy generates a new job by attracting a new business, additional jobs might also be created, mainly through increased demand for local goods and services. This positive effect on employment is partially offset by general equilibrium effects induced by changes in local wages and prices of local services. In this paper, I estimate the long-term employment multiplier at the local level. Specifically, I quantify the long-term change in the number of jobs in a city’s tradable and nontradable sectors generated by an exogenous increase in the number of jobs in the tradable sector, allowing for the endogenous reallocation of factors and adjustment of prices.