The Geography of Opportunity: Regions and Local Job Multipliers

This chapter follows the labour-market effects of services trade into the regions where people live and look for work. The focus is two related but distinct questions: does trade exposure make workers more likely to move between regions, and can growth in tradable services create jobs in local activities that are not themselves traded? The answers show how opportunity can spread beyond a directly exposed employer, while also showing why a regional employment gain should not be mistaken for a guarantee of better or more secure work.

Regional mobility and employment are different outcomes

A worker’s practical labour market is usually regional. Housing, care responsibilities, family ties, transport, and attachment to a place all limit how easily someone can respond to an opportunity far away. A national increase in services trade can therefore affect workers through the regions in which they already live, through the regions they move to, or through the local demand created by trade-linked employment. Looking only at the sector of the new job misses this geographic interface.

The OECD analysis measures regional exposure by combining a region’s initial sector composition with the later trade exposure of those sectors. A region heavily concentrated in activities that become more involved in services trade receives a higher regional exposure measure. This does not mean that every resident works in those activities. It means that the region’s bundle of economic activity is more connected to the trade change, so its wider labour market may respond even for residents employed elsewhere.

The first regional outcome is movement between regions within the same country. Such movement is uncommon when the regions are large: the report finds that fewer than one percent of workers switch between regions from one year to the next in the underlying descriptive data. Against that low baseline, services-trade exposure is associated with a small increase in inter-regional moves, especially when exposure is measured through occupations. The result extends the earlier picture of labour-market dynamism: trade may be linked not only to changing jobs, but also to a modestly greater willingness or need to relocate for an opportunity.

The direction of that association matters. The study finds no indication that services trade creates a necessity to leave because local opportunities have collapsed. Other results point toward employment expansion, so the authors regard the extra regional movement as more consistent with workers pursuing opportunities elsewhere than with a general flight from deteriorating local labour markets. That is a reasonable interpretation of the pattern, but it remains an interpretation. The regional regressions do not identify the particular job offer that caused an individual to move, or whether the move improved that person’s welfare.

The second outcome is regional employment, and here two denominators must be kept separate. The employment rate measures the share of people who actively want to work and are employed; it is the inverse of the unemployment rate. The employment share measures employed people as a share of everyone living in the region, including students, homemakers, people unable to work, and retirees.