Deindustrialization and demographic change: Evidence from big plant closures and downsizing

Abstract

We estimate the causal effect of big manufacturing plant closures and downsizing on the socioeconomic composition of Canadian cities between 2001 and 2021. Our instrumental variables estimates show that big manufacturing plant closures and downsizing—large local labour demand shocks—lead to less population growth and a shift in the demographic composition of cities toward an older population and less families. We find no other robust sociodemographic changes following big manufacturing plant closures. Exploiting heterogeneity across cities, we also find no robust evidence of city‐level characteristics that mitigate the negative effects of large local labour demand shocks.