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The Role of Expectations: An Application to Internal Migration

Author

Listed:
  • Robert Baumann

    (Department of Economics, College of the Holy Cross)

  • Justin Svec

    (Department of Economics, College of the Holy Cross)

  • Francis Sanzari

Abstract

This paper examines the impact of unemployment on migration. In a theoretical model, we show that unemployment, per se, does not affect migration. Rather, migration only occurs when unemployment shocks force residents to update their expectations of the area's unemployment rate. Once these expectations change, migration reallocates labor to bring the economy back to equilibrium. To test this theory, we devise an empirical strategy using state level data in the U.S. from 2000 to 2010, we find strong empirical evidence that unemployment shocks outside of expectations have a far greater impact on migration than unemployment shocks that are within expectations.

Suggested Citation

  • Robert Baumann & Justin Svec & Francis Sanzari, 2012. "The Role of Expectations: An Application to Internal Migration," Working Papers 1205, College of the Holy Cross, Department of Economics.
    • Handle: RePEc:hcx:wpaper:1205
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    File URL: https://hcapps.holycross.edu/hcs/RePEc/hcx/HC1205-Baumann-Svec-Sanzari_InternalMigration.pdf
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    References listed on IDEAS

    as
    1. Raven E. Saks & Abigail Wozniak, 2011. "Labor Reallocation over the Business Cycle: New Evidence from Internal Migration," Journal of Labor Economics, University of Chicago Press, vol. 29(4), pages 697-739.
    2. Abigail Wozniak, 2010. "Are College Graduates More Responsive to Distant Labor Market Opportunities?," Journal of Human Resources, University of Wisconsin Press, vol. 45(4), pages 944-970.
    3. Greenwood, Michael J, 1975. "Research on Internal Migration in the United States: A Survey," Journal of Economic Literature, American Economic Association, vol. 13(2), pages 397-433, June.
    4. Paul S. Davies & Michael J. Greenwood & Haizheng Li, 2001. "A Conditional Logit Approach to U.S. State‐to‐State Migration," Journal of Regional Science, Wiley Blackwell, vol. 41(2), pages 337-360, May.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Huaxin Wang-Lu & Octasiano Miguel Valerio Mendoza, 2022. "Job Prospects and Labour Mobility in China," Papers 2207.08282, arXiv.org, revised Sep 2022.

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    More about this item

    Keywords

    Migration; unemployment; expectations;
    All these keywords.

    JEL classification:

    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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