Frictional Unemployment and the Role of Industrial Diversity
Since many individuals are immobile between city labor markets in t he short run, the industrial structure of cities plays an important role in determining the national rate of unemployment. This paper argues that a city's frictional unemployment rate will be lower the more industrially diversified is the city; that is, the more evenly distributed is employment across industries. The empirical work on ninety-one large standard metropolitan statistical areas strongly supports the hypothesis. The difference in frictional unemployment rates between the twenty most and least diverse cities i s estimated at about 2.4 percentage points. Copyright 1988, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
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Volume (Year): 103 (1988)
Issue (Month): 4 (November)
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