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The Role of Expectations: An Application to Internal Migration

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Author Info

  • 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.

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File URL: http://college.holycross.edu/RePEc/hcx/Baumann-Svec-Sanzari_InternalMigration.pdf
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Bibliographic Info

Paper provided by College of the Holy Cross, Department of Economics in its series Working Papers with number 1205.

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Length: 23 pages
Date of creation: Dec 2012
Date of revision:
Handle: RePEc:hcx:wpaper:1205

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Keywords: Migration; unemployment; expectations;

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  1. 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.
  2. 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.
  3. Raven E. Saks & Abigail Wozniak, 2007. "Labor reallocation over the business cycle: new evidence from internal migration," Finance and Economics Discussion Series 2007-32, Board of Governors of the Federal Reserve System (U.S.).
  4. 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.
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