Thünen-Series of Applied Economic Theory - Working Paper No. 165
Since the early 1970s, it was argued that shifts from relatively smaller to larger youth cohorts in the labor force raise the unemploy- ment rate. In contrast, Shimer (2001) comes to a contrary conclusion using US state level data. I provide a theoretical framework for local labor markets that considers age cohort differences in labor market characteristics. Using a spatial panel data model and US county level data (2000-2014), the estimates provide strong evidence that aging of the working age population reduces overall unemployment by almost one percentage point. Long-run effects that consider local feedbacks are even larger.
Regional Unemployment Spatial Interactions Aging Panel Data Spatial Model