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Journal of Political Economy Vol. 131 No. 10 2023

Labor Market Conflict and the Decline of the Rust Belt

Simeon D. Alder1,2,3; David Lagakos1,2,3; Lee E. Ohanian1,2,3

1 National Bureau of Economic Research · 2 University of Wisconsin–Madison · 3 University of California, Los Angeles

Abstract

No region of the United States fared worse over the postwar period than the Rust Belt. This paper analyzes how much of its decline can be accounted for by the persistent labor market conflict that characterized Rust Belt union-management relations. We develop a multisector, multiregion, dynamic general equilibrium model in which labor market conflict leads to strikes, wage premia, lower investment, and lower productivity growth. These lead to shrinking Rust Belt industries and to workers moving out of the Rust Belt. Labor conflict accounts for half of the decline in the region’s share of manufacturing employment. Foreign competition plays a smaller role, and its effects are concentrated after most of the region’s decline had already occurred.

DOI
10.1086/724852
Volume
131
Issue
10
Pages
2780-2824
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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