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Big Locational Differences in Unemployment Despite High Labor Mobility

  • Northwestern University
  • Damba Lkhagvasuren

Considerable labor mobility exists across U.S. states, enough that, if migration arbitrages local unemployment, one might expect very low unemployment differences across states. However, cross-state data reveal large unemployment differences. An equilibrium multi-location model with stochastic worker-location match productivity and within-location trading frictions can account for these facts. In the model, some workers move to, or stay in, a location with high unemployment because they are more productive there than elsewhere. According to the model, labor mobility and aggregate unemployment are negatively related. This prediction is in stark contrast to standard sectoral reallocation theory, but consistent with the U.S. data.

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Paper provided by Society for Economic Dynamics in its series 2007 Meeting Papers with number 922.

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Date of creation: 2007
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Handle: RePEc:red:sed007:922
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  1. Kambourov, Gueorgui & Manovskii, Iourii, 2004. "Occupational Mobility and Wage Inequality," IZA Discussion Papers 1189, Institute for the Study of Labor (IZA).
  2. Coen-Pirani, Daniele, 2010. "Understanding gross worker flows across U.S. states," Journal of Monetary Economics, Elsevier, vol. 57(7), pages 769-784, October.
  3. Dale T. Mortensen & Eva Nagypal, 2005. "More on Unemployment and Vacancy Fluctuations," NBER Working Papers 11692, National Bureau of Economic Research, Inc.
  4. Richard Rogerson & Lodewijk P. Visschers & Randall Wright, 2008. "Labor Market Fluctuations in the Small and in the Large," NBER Working Papers 13872, National Bureau of Economic Research, Inc.
  5. Damba Lkhagvasuren & Ragchaasuren Galindev, 2008. "Discretization of Highly-Persistent Correlated AR(1) Shocks," Working Papers 08012, Concordia University, Department of Economics, revised Nov 2008.
  6. Gordon Dahl, 1997. "Mobility and the Returns to Education: Testing A Roy Model With Multiple Markets," Working Papers 760, Princeton University, Department of Economics, Industrial Relations Section..
  7. Fatih Guvenen, 2009. "An Empirical Investigation of Labor Income Processes," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 58-79, January.
  8. Hagedorn, Marcus & Manovskii, Iourii, 2008. "The cyclical behavior of equilibrium unemployment and vacancies revisited," Working Paper Series 0853, European Central Bank.
  9. Abraham, Katharine G. & Katz, Lawrence F., 1986. "Cyclical Unemployment: Sectoral Shifts or Aggregate Disturbances?," Scholarly Articles 3442781, Harvard University Department of Economics.
  10. Andolfatto, David & Gomme, Paul, 1996. "Unemployment insurance and labor-market activity in Canada," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 44(1), pages 47-82, June.
  11. Paul Bauer & Yoonsoo Lee, 2005. "Labor productivity growth across states," Economic Commentary, Federal Reserve Bank of Cleveland, issue Jun.
  12. Giuseppe Moscarini & Francis G. Vella, 2008. "Occupational Mobility and the Business Cycle," NBER Working Papers 13819, National Bureau of Economic Research, Inc.
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