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Migration, Frictional Unemployment, and Welfare‐Improving Labor Policies

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  • Yasuhiro Sato

Abstract

. Studies have suggested that there exists job search and recruiting friction in urban areas. This paper constructs a two‐sector (rural and urban) model involving this factor and investigates how it affects migration and what the optimal policies should be. An analysis shows that frictional urban unemployment brings about intersector wage differentials and that an economy almost always has distortion in the absence of government intervention. Tax and subsidy policies that remove the distortion are explored. Setting urban wages appropriately is also shown to attain the optimum. Finally, we explore the criterion to judge whether changing urban wages as a policy, such as the minimum wage law, enhances social welfare.

Suggested Citation

  • Yasuhiro Sato, 2004. "Migration, Frictional Unemployment, and Welfare‐Improving Labor Policies," Journal of Regional Science, Wiley Blackwell, vol. 44(4), pages 773-793, November.
  • Handle: RePEc:bla:jregsc:v:44:y:2004:i:4:p:773-793
    DOI: 10.1111/j.0022-4146.2004.00357.x
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    References listed on IDEAS

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    1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877.
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    Cited by:

    1. Aubert, Diane & Chiroleu-Assouline, Mireille, 2019. "Environmental tax reform and income distribution with imperfect heterogeneous labour markets," European Economic Review, Elsevier, vol. 116(C), pages 60-82.
    2. Zenou, Yves, 2011. "Search, migration, and urban land use: The case of transportation policies," Journal of Development Economics, Elsevier, vol. 96(2), pages 174-187, November.
    3. Mahreen Mahmud & Tareena Musaddiq & Farah Said, 2010. "Internal Migration Patterns in Pakistan—The Case for Fiscal Decentralisation," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 49(4), pages 593-607.
    4. Nicoletta Batini & Young-Bae Kim & Paul Levine & Emanuela Lotti, 2009. "Informal Labour and Credit Markets: A Survey," School of Economics Discussion Papers 0609, School of Economics, University of Surrey.
    5. Evert Meijers & Martijn Burger & Masahisa Fujita & Nobuaki Hamaguchi, 2016. "Supply chain internationalization in East Asia: Inclusiveness and risks," Papers in Regional Science, Wiley Blackwell, vol. 95(1), pages 81-100, March.
    6. Daisuke Matsuzaki & Yoshiyasu Ono, 2021. "Regional subsidies and interregional labor movement," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 66(3), pages 557-577, June.
    7. Lee, Chul-In, 2008. "Migration and the wage and unemployment gaps between urban and non-urban sectors: A dynamic general equilibrium reinterpretation of the Harris-Todaro equilibrium," Labour Economics, Elsevier, vol. 15(6), pages 1416-1434, December.
    8. Wayne Edwards & Lee Huskey, 2008. "Job search with an external opportunity: an experimental exploration of the Todaro Paradox," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 42(4), pages 807-819, December.
    9. Pierrard, Olivier, 2008. "Commuters, residents and job competition," Regional Science and Urban Economics, Elsevier, vol. 38(6), pages 565-577, November.
    10. Christopher Goetz, 2014. "Unemployment Duration And Geographic Mobility: Do Movers Fare Better Than Stayers?," Working Papers 14-41, Center for Economic Studies, U.S. Census Bureau.
    11. Khan, M. Ali Khan, 2007. "The Harris-Todaro Hypothesis," MPRA Paper 2201, University Library of Munich, Germany.
    12. Kenneth Backlund & Tomas Sjögren & Jesper Stage, 2014. "Optimal tax and expenditure policy in the presence of emigration: Are credit restrictions important?," Indian Growth and Development Review, Emerald Group Publishing, vol. 7(2), pages 98-117, November.
    13. Zenou, Yves, 2005. "The Todaro Paradox Revisited," IZA Discussion Papers 1861, Institute of Labor Economics (IZA).
    14. Zenou, Yves, 2008. "Job search and mobility in developing countries. Theory and policy implications," Journal of Development Economics, Elsevier, vol. 86(2), pages 336-355, June.
    15. Mathan Satchi & Jonathan Temple, 2009. "Labor Markets and Productivity in Developing Countries," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 183-204, January.
    16. Daisuke Matsuzaki & Yoshiyasu Ono, 2018. "Regional subsidies and interregional labor movement," ISER Discussion Paper 1041, Institute of Social and Economic Research, Osaka University.
    17. Wayne Edwards & Lee Huskey, 2014. "The search goes on: Parameter effects on the return migration decision," Migration Letters, Transnational Press London, UK, vol. 11(1), pages 79-89, January.
    18. Huikang Ying, 2015. "Labour Informality, Selective Migration, and Productivity in General Equilibrium," Bristol Economics Discussion Papers 15/653, School of Economics, University of Bristol, UK.
    19. Lall, Somik V. & Selod, Harris & Shalizi, Zmarak, 2006. "Rural-urban migration in developing countries : a survey of theoretical predictions and empirical findings," Policy Research Working Paper Series 3915, The World Bank.
    20. Chul‐In Lee, 2010. "Can Search‐Matching Models Explain Migration And Wage And Unemployment Gaps In Developing Economies? A Calibration Approach," Journal of Regional Science, Wiley Blackwell, vol. 50(2), pages 635-654, May.
    21. Chul-In Lee, 2015. "Agglomeration, search frictions and growth of cities in developing economies," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 55(2), pages 421-451, December.
    22. Yasuhiro Sato, 2009. "Capital tax competition and search unemployment," Papers in Regional Science, Wiley Blackwell, vol. 88(4), pages 749-764, November.

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