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Understanding Gross Workers Flows Across U.S. States

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  • Daniele Coen-Pirani

    () (Tepper School of Business Carnegie Mellon University)

Abstract

This paper documents and provides an explanation for the main stylized facts about net and gross workers flows across states in the U.S. While it is generally known that gross flows of population across locations are significantly larger in the United States than within most European countries (see Hassler et al., 2005), there is considerable heterogeneity in gross and net flows across locations within the United States itself. The main purpose of the paper is to test whether a simple general equilibrium search model based on Lucas and Prescott (1974)'s island economy can account for the main stylized facts. The paper builds on work by Blanchard and Katz (1992), who focus only on net, rather than gross, flows of workers and on the partial equilibrium analysis of migration decisions by Kennan and Walker (2005). I start by documenting these facts using the decennial Census of the U.S for the post-WWII period. The latter allows one to determine a respondent's state of residence in the Census year as well as five years before the Census year. This information is used to construct state-level aggregate gross and net flow rates of workers. These flows are adjusted to take into account the different demographic and industrial composition of the workforce across states and differences in other state characteristics, such as size. The key stylized facts are as follows. In the cross-sectional dimension: (1) gross inflow rates are more dispersed than net flow rates, which, in turn, are more dispersed than gross outflow rates. (2) Gross inflow and outflow rates are positively correlated. (3) Gross and net inflow rates are highly positively correlated, while net flow rates and gross outflow rates are uncorrelated. These three facts suggest that reallocation of population within the U.S. occurs mainly through variations in gross inflows (large in fast-growing states and small in slow-growing states), rather than in gross outflows. In other words, states that tend to lose population to other states do so by attracting fewer new workers as opposed to losing more local ones. In the time-series dimension, there is a large degree of persistence in both gross and net flow rates across Census years for a given state. Last, there is no significant correlation between average state wages (adjusted by differences in living costs) and gross or net flow rates. In order to explain these facts, I consider a simple search model. The model economy is composed by a set of local labor markets ("islands"), that are hit by idiosyncratic and persistent labor demand shocks. Local wages tend to rise in response to these shocks, but workers' mobility across islands limits the extent to which wages can differ across locations. At a point in time, a location experiences both gross inflows and gross outflows. This is because offered wages in an island, in addition to a location-wide component, also have an idiosyncratic one. The latter gives rise to gross flows. In general equilibrium, the value of migration is pinned down by a zero excess demand condition for aggregate net flows. The model's parameters are estimated using a simulated method of moments. Specifically, estimation occurs in two stages. I first derive the law of motion for net flow rates implied by the model. This is shown to depend on the parameters of the stochastic process for the labor demand shock. The latter are estimated by matching the cross-sectional dispersion of net flow rates and their first and second order autocorrelation coefficients. Second, I feed the estimated process for local labor demand shocks into the model and estimate the remaining parameters by matching the following cross-sectional moments: observed dispersion in average relative wages, average observed wage dispersion within states, the average outflow rate across states, and the fraction of all moves that are motivated by economic factors. At the time of this writing, the estimation of the model is still taking place. Preliminary results based on calibrations of the model are promising. In particular, the model can account for the dispersion in gross flows and the positive cross-sectional correlation between inflows and outflows. The estimated model can be used to assess the quantitative importance of some of the explanations that have been proposed for the lower mobility rates within European countries than in the U.S.: higher compression of European wage distributions, lower dispersion of demand conditions across local labor markets within European countries, etc

Suggested Citation

  • Daniele Coen-Pirani, 2006. "Understanding Gross Workers Flows Across U.S. States," 2006 Meeting Papers 459, Society for Economic Dynamics.
  • Handle: RePEc:red:sed006:459
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    References listed on IDEAS

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    Cited by:

    1. Christian Bayer & Falko Juessen, 2012. "On the Dynamics of Interstate Migration: Migration Costs and Self-Selection," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(3), pages 377-401, July.
    2. Jauer, Julia & Liebig, Thomas & Martin, John P. & Puhani, Patrick A., 2014. "Migration as an adjustment mechanism in the crisis? A comparison of Europe and the United States," Hannover Economic Papers (HEP) dp-537, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    3. Karahan, Fatih & Rhee, Serena, 2014. "Population aging, migration spillovers, and the decline in interstate migration," Staff Reports 699, Federal Reserve Bank of New York, revised 01 Apr 2017.
    4. repec:wly:iecrev:v:58:y:2017:i::p:57-94 is not listed on IDEAS
    5. Chakrabarti, Anindya S. & Sengupta, Aparna, 2017. "Productivity differences and inter-state migration in the U.S.: A multilateral gravity approach," Economic Modelling, Elsevier, vol. 61(C), pages 156-168.
    6. Kawata, Keisuke & Nakajima, Kentaro & Sato, Yasuhiro, 2016. "Multi-region job search with moving costs," Regional Science and Urban Economics, Elsevier, vol. 61(C), pages 114-129.
    7. Greg Kaplan & Sam Schulhofer‐Wohl, 2017. "Understanding The Long‐Run Decline In Interstate Migration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 58, pages 57-94, February.
    8. Maximiliano Dvorkin, 2013. "Sectoral Shocks, Reallocation and Unemployment in a Model of Competitive Labor Markets," 2013 Meeting Papers 1229, Society for Economic Dynamics.
    9. Davis, Morris A. & Fisher, Jonas D. M. & Veracierto, Marcelo, 2013. "Gross Migration, Housing and Urban Population Dynamics," Working Paper Series WP-2013-19, Federal Reserve Bank of Chicago.
    10. Lkhagvasuren, Damba, 2014. "Education, mobility and the college wage premium," European Economic Review, Elsevier, vol. 67(C), pages 159-173.
    11. Mark D. Partridge & Dan S. Rickman & M. Rose Olfert & Ying Tan, 2015. "When Spatial Equilibrium Fails: Is Place-Based Policy Second Best?," Regional Studies, Taylor & Francis Journals, vol. 49(8), pages 1303-1325, August.
    12. Gregory Howard, 2017. "The Migration Accelerator: Labor Mobility, Housing, and Aggregate Demand," 2017 Meeting Papers 563, Society for Economic Dynamics.
    13. Lkhagvasuren, Damba, 2012. "Big locational unemployment differences despite high labor mobility," Journal of Monetary Economics, Elsevier, vol. 59(8), pages 798-814.
    14. Plamen Nemov, 2015. "Regional Reallocation and Housing Markets in a Model of Frictional Migration," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(4), pages 863-880, October.
    15. Auray Stéphane & Fuller David & Lkhagvasuren Damba & Terracol Antoine, 2017. "Dynamic Comparative Advantage, Directed Mobility Across Sectors, and Wages," Working Papers 2017-59, Center for Research in Economics and Statistics.
    16. Lalé, Etienne, 2017. "Worker reallocation across occupations: Confronting data with theory," Labour Economics, Elsevier, vol. 44(C), pages 51-68.
    17. Armenter, Roc & Ortega, Francesc, 2011. "Credible redistribution policy and skilled migration," European Economic Review, Elsevier, vol. 55(2), pages 228-245, February.
    18. Damba Lkhagvasuren & Roy Nitulescu, 2013. "Sectoral Mobility and Unemployment with Heterogeneous Moving Costs," Journal of Labor Research, Springer, vol. 34(3), pages 339-358, September.
    19. Parkhomenko, Andrii, 2016. "Opportunity to Move: Macroeconomic Effects of Relocation Subsidies," MPRA Paper 75256, University Library of Munich, Germany.
    20. 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).
    21. Leah Boustan & Allison Shertzer, 2013. "Population Trends as a Counterweight to Central City Decline, 1950–2000," Demography, Springer;Population Association of America (PAA), vol. 50(1), pages 125-147, February.
    22. Chakrabarti, Anindya S. & Dutta, Aparna, 2015. "Economic incentives versus institutional frictions: migration dynamics within Europe," IIMA Working Papers WP2015-08-06, Indian Institute of Management Ahmedabad, Research and Publication Department.
    23. Maximiliano Dvorkin, 2017. "Skills, Occupations, and the Allocation of Talent over the Business Cycle," 2017 Meeting Papers 1527, Society for Economic Dynamics.
    24. Amior, Michael & Manning, Alan, 2017. "The persistence of local joblessness," LSE Research Online Documents on Economics 86558, London School of Economics and Political Science, LSE Library.
    25. KAWATA Keisuke & NAKAJIMA Kentaro & SATO Yasuhiro, 2014. "Competitive Search with Moving Costs," Discussion papers 14052, Research Institute of Economy, Trade and Industry (RIETI).

    More about this item

    Keywords

    Geographical mobility of labor; gross flows; wage differentials;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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