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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
Date of revision:
Handle: RePEc:red:sed007:922
Contact details of provider: Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA
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