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Big Locational Differences in Unemployment Despite High Labor Mobility

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  • Northwestern University
  • Damba Lkhagvasuren

Abstract

Considerable labor mobility exists across U.S. states, enough that, if migration arbitrages local unemployment, one might expect very low unemployment differences across states. However, cross-state data reveal large unemployment differences. An equilibrium multi-location model with stochastic worker-location match productivity and within-location trading frictions can account for these facts. In the model, some workers move to, or stay in, a location with high unemployment because they are more productive there than elsewhere. According to the model, labor mobility and aggregate unemployment are negatively related. This prediction is in stark contrast to standard sectoral reallocation theory, but consistent with the U.S. data.

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2007 Meeting Papers with number 922.

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Date of creation: 2007
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Handle: RePEc:red:sed007:922

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References

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  1. Fatih Guvenen, 2007. "An empirical investigation of labor income processes," IFS Working Papers W07/13, Institute for Fiscal Studies.
  2. Paul Bauer & Yoonsoo Lee, 2005. "Labor productivity growth across states," Economic Commentary, Federal Reserve Bank of Cleveland, issue Jun.
  3. Marcus Hagedorn & Iourii Manovskii, 2008. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited," American Economic Review, American Economic Association, vol. 98(4), pages 1692-1706, September.
  4. Gordon Dahl, 1997. "Mobility and the Returns to Education: Testing A Roy Model With Multiple Markets," Working Papers 760, Princeton University, Department of Economics, Industrial Relations Section..
  5. Damba Lkhagvasuren & Ragchaasuren Galindev, 2008. "Discretization of Highly-Persistent Correlated AR(1) Shocks," Working Papers 08012, Concordia University, Department of Economics, revised Nov 2008.
  6. Daniele Coen-Pirani, . "Understanding Gross Workers Flows Across U.S. States," GSIA Working Papers 2006-E68, Carnegie Mellon University, Tepper School of Business.
  7. Andolfatto, David & Gomme, Paul, 1996. "Unemployment insurance and labor-market activity in Canada," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 44(1), pages 47-82, June.
  8. Dale T. Mortensen & Eva Nagypal, 2005. "More on Unemployment and Vacancy Fluctuations," NBER Working Papers 11692, National Bureau of Economic Research, Inc.
  9. Giuseppe Moscarini & Francis G. Vella, 2008. "Occupational Mobility and the Business Cycle," NBER Working Papers 13819, National Bureau of Economic Research, Inc.
  10. Richard Rogerson & Lodewijk P. Visschers & Randall Wright, 2009. "Labor market fluctuations in the small and in the large," International Journal of Economic Theory, The International Society for Economic Theory, vol. 5(1), pages 125-137.
  11. Abraham, Katharine G & Katz, Lawrence F, 1986. "Cyclical Unemployment: Sectoral Shifts or Aggregate Disturbances?," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 507-22, June.
  12. Kambourov, Gueorgui & Manovskii, Iourii, 2004. "Occupational Mobility and Wage Inequality," IZA Discussion Papers 1189, Institute for the Study of Labor (IZA).
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Cited by:
  1. Daniele Coen-Pirani, . "Understanding Gross Workers Flows Across U.S. States," GSIA Working Papers 2006-E68, Carnegie Mellon University, Tepper School of Business.
  2. Roc Armenter & Francesc Ortega, 2007. "Credible redistributive policies and migration across US States," Economics Working Papers 1022, Department of Economics and Business, Universitat Pompeu Fabra.
  3. Eberly, Janice & Rebelo, Sergio & Vincent, Nicolas, 2012. "What explains the lagged-investment effect?," Journal of Monetary Economics, Elsevier, vol. 59(4), pages 370-380.
  4. Wozniak, Abigail, 2006. "Educational Differences in the Migration Responses of Young Workers to Local Labor Market Conditions," IZA Discussion Papers 1954, Institute for the Study of Labor (IZA).
  5. 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.).
  6. Armenter, Roc & Ortega, Francesc, 2011. "Credible redistribution policy and skilled migration," European Economic Review, Elsevier, vol. 55(2), pages 228-245, February.
  7. Eberly, Janice & Rebelo, Sérgio & Vincent, Nicolas, 2008. "Investment and Value: A Neoclassical Benchmark," CEPR Discussion Papers 6737, C.E.P.R. Discussion Papers.
  8. Keisuke Kawata & Kentaro Nakajima & Yasuhiro Sato, 2013. "Analyzing the impact of labor market integration," Discussion Papers in Economics and Business 13-28, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).

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