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The Relationship between Net Migration and Unemployment: The Role of Expectations

Author

Listed:
  • Robert Baumann

    (Department of Economics and Accounting, College of the Holy Cross, Worcester, MA 01609.)

  • Justin Svec

    (Department of Economics and Accounting, College of the Holy Cross, Worcester, MA 01609.)

  • Francis Sanzari

    (Department of Economics and Accounting, College of the Holy Cross, Worcester, MA 01609.)

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. Testing this theory, we devise an empirical strategy using state-level data in the US from 2000 to 2010. We estimate that the impact of unemployment shocks outside of expectations is over 25 times greater than the impact of unemployment shocks that are within expectations.

Suggested Citation

  • Robert Baumann & Justin Svec & Francis Sanzari, 2015. "The Relationship between Net Migration and Unemployment: The Role of Expectations," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 41(3), pages 443-458, June.
    • Handle: RePEc:pal:easeco:v:41:y:2015:i:3:p:443-458
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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.

    More about this item

    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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