Understanding Gross Workers Flows Across U.S. States
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
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||03 Dec 2006|
|Contact details of provider:|| Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA|
Web page: http://www.EconomicDynamics.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- David Albouy, 2009.
"The Unequal Geographic Burden of Federal Taxation,"
Journal of Political Economy,
University of Chicago Press, vol. 117(4), pages 635-667, 08.
- David Y. Albouy, 2008. "The Unequal Geographic Burden of Federal Taxation," NBER Working Papers 13995, National Bureau of Economic Research, Inc.
- Ciccone, Antonio, 2002. "Agglomeration effects in Europe," European Economic Review, Elsevier, vol. 46(2), pages 213-227, February.
- Antonio Ciccone, 1998. "Agglomeration-effects in Europe," Economics Working Papers 499, Department of Economics and Business, Universitat Pompeu Fabra, revised Aug 1999.
- Matteo Iacoviello, 2005. "House Prices, Borrowing Constraints, and Monetary Policy in the Business Cycle," American Economic Review, American Economic Association, vol. 95(3), pages 739-764, June.
- Matteo Iacoviello, 2002. "House prices, borrowing constraints and monetary policy in the business cycle," Boston College Working Papers in Economics 542, Boston College Department of Economics, revised 06 Dec 2004.
- Damba Lkhagvasuren, 2005. "Big Locational Differences in Unemployment Despite High Labor Mobility," Working Papers 12002, Concordia University, Department of Economics, revised Feb 2012.
- Northwestern University & Damba Lkhagvasuren, 2007. "Big Locational Differences in Unemployment Despite High Labor Mobility," 2007 Meeting Papers 922, Society for Economic Dynamics.
- Rappaport, Jordan, 2004. "Why are population flows so persistent?," Journal of Urban Economics, Elsevier, vol. 56(3), pages 554-580, November.
- Jordan Rappaport, 1999. "Why are population flows so persistent?," Research Working Paper 99-13, Federal Reserve Bank of Kansas City.
- Alvarez, Fernando & Veracierto, Marcelo, 2012. "Fixed-term employment contracts in an equilibrium search model," Journal of Economic Theory, Elsevier, vol. 147(5), pages 1725-1753.
- Fernando Alvarez & Marcelo Veracierto, 2005. "Fixed term employment contracts in an equilibrium search model," Working Paper Series WP-05-14, Federal Reserve Bank of Chicago.
- Fernando Alvarez & Marcelo Veracierto, 2006. "Fixed-Term Employment Contracts in an Equilibrium Search Model," NBER Working Papers 12791, National Bureau of Economic Research, Inc.
- Roback, Jennifer, 1982. "Wages, Rents, and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1257-1278, December.
- Jovanovic, Boyan & Moffitt, Robert, 1990. "An Estimate of a Sectoral Model of Labor Mobility," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 827-852, August.
- Jovanovic, Boyan & Moffitt, Robert, 1988. "An Estimate Of A Sectoral Model Of Labor Mobility," Working Papers 88-32, C.V. Starr Center for Applied Economics, New York University.
- Boyan Jovanovic & Robert Moffitt, 1990. "An Estimate of a Sectoral Model of Labor Mobility," NBER Working Papers 3227, National Bureau of Economic Research, Inc.
- Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
- Gueorgui Kambourov & Iourii Manovskii, 2009. "Occupational Mobility and Wage Inequality," Review of Economic Studies, Oxford University Press, vol. 76(2), pages 731-759.
- Kambourov, Gueorgui & Manovskii, Iourii, 2004. "Occupational Mobility and Wage Inequality," IZA Discussion Papers 1189, Institute for the Study of Labor (IZA).
- Roc Armenter & Francesc Ortega, 2010. "Credible Redistributive Policies and Migration across US States," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(2), pages 403-423, April.
- Roc Armenter & Francesc Ortega, 2007. "Credible redistributive policies and migration across US States," Economics Working Papers 1022, Department of Economics and Business, Universitat Pompeu Fabra.
- Fernando Alvarez & Marcelo Veracierto, 2000. "Labor-Market Policies in an Equilibrium Search Model," NBER Chapters,in: NBER Macroeconomics Annual 1999, Volume 14, pages 265-316 National Bureau of Economic Research, Inc.
- Fernando Alvarez & Marcelo Veracierto, 1999. "Labor market policies in an equilibrium search model," Working Paper Series WP-99-10, Federal Reserve Bank of Chicago.
- Greenwood, Michael J, 1975. "Research on Internal Migration in the United States: A Survey," Journal of Economic Literature, American Economic Association, vol. 13(2), pages 397-433, June.
- Timothy J. Bartik, 1991. "Who Benefits from State and Local Economic Development Policies?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wbsle.
- Lucas, Robert Jr. & Prescott, Edward C., 1974. "Equilibrium search and unemployment," Journal of Economic Theory, Elsevier, vol. 7(2), pages 188-209, February.
- Davis, Steven J. & Haltiwanger, John, 1999. "Gross job flows," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 41, pages 2711-2805 Elsevier. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:red:sed006:459. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann)
If references are entirely missing, you can add them using this form.