Working Papers in Economics and Statistics 2016-22
A shock to the sector composition of the local labor market can affect long-run economic development of a location. Because structural change ultimately shifts labor from agriculture to services, an early transition to manufacturing may hamper longrun prosperity. The identification strategy exploits military World War II (WWII) casualties in Austrian municipalities as an exogenous shock to the local labor market. WWII casualties shifted labor out of agriculture into manufacturing in the short-run, which eventually led to a di.erential path of structural change. In the long-run, I find a strong and robust negative effect of WWII casualties on subsequent economic output.
structural change local labor markets spatial equilibrium World War II Austria