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A Model of Regional Contraction and Unemployment


  • McCormick, Barry
  • Sheppard, Stephen


A two-region economy is studied in which one region has a competitive labor market whereas the other has a congested labor market in which locating a job uses resources. Workers loosing jobs in the congested region choose between migration followed by an immediate job offer and searching in the congested region. Steady-state decline of the labor force in the congested region is characterized together with equilibrium unemployment rates. Higher unemployment benefits may increase the rate of contraction of the congested market if the consequence for job matching outweighs that for migration conditional upon a given level of unemployment. Copyright 1992 by Royal Economic Society.

Suggested Citation

  • McCormick, Barry & Sheppard, Stephen, 1992. "A Model of Regional Contraction and Unemployment," Economic Journal, Royal Economic Society, vol. 102(411), pages 366-377, March.
  • Handle: RePEc:ecj:econjl:v:102:y:1992:i:411:p:366-77

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    References listed on IDEAS

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    2. Tversky, Amos & Slovic, Paul & Kahneman, Daniel, 1990. "The Causes of Preference Reversal," American Economic Review, American Economic Association, vol. 80(1), pages 204-217, March.
    3. Sarah Lichtenstein & Paul Slovic, 1973. "Response-induced reversals of preference in gambling: An extended replication in las vegas," Framed Field Experiments 00169, The Field Experiments Website.
    4. Loomes, Graham & Sugden, Robert, 1987. "Some implications of a more general form of regret theory," Journal of Economic Theory, Elsevier, vol. 41(2), pages 270-287, April.
    5. David E. Bell, 1982. "Regret in Decision Making under Uncertainty," Operations Research, INFORMS, vol. 30(5), pages 961-981, October.
    6. Jones-Lee, M W & Hammerton, M & Philips, P R, 1985. "The Value of Safety: Results of a National Sample Survey," Economic Journal, Royal Economic Society, vol. 95(377), pages 49-72, March.
    7. Camerer, Colin F, 1989. "An Experimental Test of Several Generalized Utility Theories," Journal of Risk and Uncertainty, Springer, vol. 2(1), pages 61-104, April.
    8. Battalio, Raymond C & Kagel, John H & Jiranyakul, Komain, 1990. "Testing between Alternative Models of Choice under Uncertainty: Some Initial Results," Journal of Risk and Uncertainty, Springer, vol. 3(1), pages 25-50, March.
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    Cited by:

    1. David Gray, 2005. "An examination of regional interaction and super-regions in Britain: An error correction model approach," Regional Studies, Taylor & Francis Journals, vol. 39(5), pages 619-632.
    2. Semerikova, Elena, 2014. "Unemployment in East and West Germany: Spatial panel data analysis," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 35(3), pages 107-132.
    3. Sarantis LOLOS & Evangelia PAPAPETROU, 2012. "Unemployment disparities and persistence Assessing the evidence from Greek regions, 1981-2008," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 12(1), pages 69-90.
    4. Lisa Morris Grobar, 1996. "Comparing The New England And Southern California Regional Recessions," Contemporary Economic Policy, Western Economic Association International, vol. 14(3), pages 71-84, July.
    5. Patacchini, Eleonora & Zenou, Yves, 2006. "Search activities, cost of living and local labor markets," Regional Science and Urban Economics, Elsevier, vol. 36(2), pages 227-248, March.
    6. Patacchini, Eleonora & Zenou, Yves, 2003. "Search Intensity, Cost of Living and Local Labour Markets in Britain," CEPR Discussion Papers 3722, C.E.P.R. Discussion Papers.
    7. Molho, Ian, 2001. "Spatial Search, Migration and Regional Unemployment," Economica, London School of Economics and Political Science, vol. 68(270), pages 269-283, May.
    8. repec:jct:journl:v:ii:y:2007:i:2:p:35-42 is not listed on IDEAS

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