This article examines the effect of a change in stock market trading volume on employment in the New York City securities industry. This relationship is used as the first stage in an instrumental variables model to determine the effect that securities employment has on other forms of employment in the city. The resulting elasticities imply that a 10 percent decrease in securities industry employment would depress employment in the retail, services, and restaurant sectors by more than 1 percent; in the business services sector by about 4 percent; and in total private jobs by about 1 percent. The elasticities are then applied to New York City employment levels and to a proposal to reinstate the stock transfer tax on the city’s stock markets. At a trading volume decline of 10 percent, these elasticities imply that a stock transfer tax could cost New York City between 30,000 and 42,000 private-sector jobs.
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