Why do regions decline? This paper explores how adverse shocks in one period affect regional adjustment to subsequent shocks, emphasizing the role of selective migration. I leverage differential exposure to coal’s decline and variation in proximity to historical employment shifts to study this process of regional decline in Appalachia. The consequences of the 2007–2017 coal shock were more acute in counties that experienced larger declines in college-educated adults due to exogenous labor demand shifts in the 1980s.
The outside options available to workers critically determine the transitional costs of labor demand shocks. Using comprehensive administrative data, we examine the worker-level effects of the decline of coal — a regionally concentrated labor demand shock that reduced employment by more than 50% between 2011 and 2021. We show that coal workers experienced large and persistent earnings losses compared to similar workers less connected to coal.
Between 2011 and 2016, coal mining employment declined by over 50 percent in Appalachia, resulting in large earnings and employment losses in coal-dependent communities. Whether these disruptions reflect temporary adjustment costs or signal more persistent decline depends in part on the extent and nature of various investment responses. This paper leverages differential Commuting Zone (CZ-) level exposure to coal’s decline to estimate its impact on government transfers and postsecondary training investments.
