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Regional Mismatch and Labor Reallocation in an Equilibrium Model of Migration

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  • Plamen Nenov

    (Norwegian Business School (BI))

Abstract

This paper examines the importance of regional labor reallocation for unemployment and studies the link between inter-regional mobility and reallocation. I construct a multi-region economy with segmented labor markets, endogenously determined regional house prices, and limited worker mobility, and structurally estimate it using state level data for the U.S. The estimated model can account for the comovements of relative house prices and unemployment with gross out- and in-migration observed in a panel of U.S. states. The estimation reveals large reallocation barriers across local labor markets in the form of imperfect directed migration, relative house price differences compensating for labor market differences, and a high moving cost for unemployed workers. These reallocation barriers dampen the response of individual migration decisions to regional labor market differences and contribute to regional mismatch and to shifts in the U.S. Beveridge curve. I apply this framework to understand the reallocation effects of the recent housing bust in the U.S.

Suggested Citation

  • Plamen Nenov, 2013. "Regional Mismatch and Labor Reallocation in an Equilibrium Model of Migration," 2013 Meeting Papers 565, Society for Economic Dynamics.
  • Handle: RePEc:red:sed013:565
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    References listed on IDEAS

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    1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, January.
    2. Marcus Hagedorn & Iourii Manovskii, 2008. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited," American Economic Review, American Economic Association, vol. 98(4), pages 1692-1706, September.
    3. Raven E. Saks & Abigail Wozniak, 2011. "Labor Reallocation over the Business Cycle: New Evidence from Internal Migration," Journal of Labor Economics, University of Chicago Press, vol. 29(4), pages 697-739.
    4. Greg Kaplan & Sam Schulhofer-Wohl, 2012. "Interstate Migration Has Fallen Less Than You Think: Consequences of Hot Deck Imputation in the Current Population Survey," Demography, Springer;Population Association of America (PAA), vol. 49(3), pages 1061-1074, August.
    5. Sterk, Vincent, 2015. "Home equity, mobility, and macroeconomic fluctuations," Journal of Monetary Economics, Elsevier, pages 16-32.
    6. Poelhekke, Steven & van der Ploeg, Frederick, 2010. "Do Natural Resources Attract FDI? Evidence from Non-Stationary Sector-Level Data," CEPR Discussion Papers 8079, C.E.P.R. Discussion Papers.
    7. Damba Lkhagvasuren, 2009. "Large Locational Differences in Unemployment Despite High Labor Mobility: Impact of Moving Cost on Aggregate Unemployment and Welfare," Working Papers 09009, Concordia University, Department of Economics, revised Mar 2010.
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