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Net migration and state labor market dynamics

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  • Joshua Hojvat Gallin
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    Abstract

    I present a simple model of migration in which the net migration rate into a state depends on the expected present value of labor market conditions and amenities. I show that though this is a common model, existing empirical estimates do not separately identify the underlying parameters. The identification problem can be thought of as an omitted variable bias because no explicit measure of expected future labor market conditions is included. I use state-level data to estimate empirical models in which the underlying parameters are identified. I find that high wages and low unemployment encourage in-migration, but that the omitted variable bias can be large. For example, when I control for future conditions in one model, the strength of the relationship between current wages and net migration is less than half as large. I integrate the migration model into a simple labor supply and demand framework and use my estimates of the migration model to simulate a labor market's response to permanent and transitory demand shocks. In the short run, net migration responds more to permanent shocks and current wages and employment rates respond more to transitory ones.

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    Bibliographic Info

    Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 1999-16.

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    Date of creation: 1999
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    Handle: RePEc:fip:fedgfe:1999-16

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    Keywords: Emigration and immigration ; Labor market;

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    References

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    1. Fields, Gary S, 1979. "Place-to-Place Migration: Some New Evidence," The Review of Economics and Statistics, MIT Press, vol. 61(1), pages 21-32, February.
    2. Charles A. Fleischman, 1997. "The GMM parameter normalization puzzle," Finance and Economics Discussion Series 1997-43, Board of Governors of the Federal Reserve System (U.S.).
    3. Randall W. Eberts & Joe A. Stone, 1992. "Wage and Employment Adjustment in Local Labor Markets," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wea.
    4. Cochrane, John H, 1996. "A Cross-Sectional Test of an Investment-Based Asset Pricing Model," Journal of Political Economy, University of Chicago Press, vol. 104(3), pages 572-621, June.
    5. Cumby, Robert E. & Huizinga, John & Obstfeld, Maurice, 1983. "Two-step two-stage least squares estimation in models with rational expectations," Journal of Econometrics, Elsevier, vol. 21(3), pages 333-355, April.
    6. Robert J. Barro & Paul Romer, 1993. "Economic Growth," NBER Books, National Bureau of Economic Research, Inc, number barr93-1, October.
      • Robert J. Barro & Paul M. Romer, 1991. "Economic Growth," NBER Books, National Bureau of Economic Research, Inc, number barr91-1, October.
    7. Killingsworth, Mark R. & Heckman, James J., 1987. "Female labor supply: A survey," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 2, pages 103-204 Elsevier.
    8. Topel, Robert H & Rosen, Sherwin, 1988. "Housing Investment in the United States," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 718-40, August.
    9. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
    10. Timothy J. Bartik, 2003. "Local Economic Development Policies," Upjohn Working Papers and Journal Articles 03-91, W.E. Upjohn Institute for Employment Research.
    11. Robert J. Barro & Xavier Sala-i-Martin, 1991. "Convergence across States and Regions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 107-182.
    12. Pissarides, Christopher A & McMaster, Ian, 1990. "Regional Migration, Wages and Unemployment: Empirical Evidence and Implications for Policy," Oxford Economic Papers, Oxford University Press, vol. 42(4), pages 812-31, October.
    13. Chinhui Juhn & Kevin M. Murphy & Robert H. Topel, 1991. "Why Has the Natural Rate of Unemployment Increased over Time?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(2), pages 75-142.
    14. Gabriel, Stuart A. & Shack-Marquez, Janice & Wascher, William L., 1993. "Does migration arbitrage regional labor market differentials?," Regional Science and Urban Economics, Elsevier, vol. 23(2), pages 211-233, April.
    15. Abel, Andrew B, 1981. "A Dynamic Model of Investment and Capacity Utilization," The Quarterly Journal of Economics, MIT Press, vol. 96(3), pages 379-403, August.
    16. Eichengreen, Barry, 1993. "European Monetary Unification," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1321-57, September.
    17. Jaewoo Ryoo & Sherwin Rosen, 2004. "The Engineering Labor Market," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages S110-S140, February.
    18. Topel, Robert H, 1986. "Local Labor Markets," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S111-43, June.
    19. Greenwood, Michael J, 1969. "An Analysis of the Determinants of Geographic Labor Mobility in the United States," The Review of Economics and Statistics, MIT Press, vol. 51(2), pages 189-94, May.
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    21. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
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    Cited by:
    1. Jordan Rappaport, 1999. "How does labor mobility affect income convergence?," Research Working Paper 99-12, Federal Reserve Bank of Kansas City.
    2. David C Maré & Wai Kin Choy, 2001. "Regional Labour Market Adjustment and the Movements of People: A Review," Treasury Working Paper Series 01/08, New Zealand Treasury.
    3. Björn Alecke & Timo Mitze & Gerhard Untiedt, 2009. "Internal Migration, Regional Labour Market Dynamics and Implications for German East-West Disparities – Results from a Panel VAR," Ruhr Economic Papers 0096, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.

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