The Relationship between Net Migration and Unemployment: The Role of Expectations

Robert Baumann (), Justin Svec and Francis Sanzari ()
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Francis Sanzari: Department of Economics and Accounting, College of the Holy Cross, Worcester, MA 01609.

Eastern Economic Journal, 2015, vol. 41, issue 3, 443-458

Abstract: This paper examines the impact of unemployment on migration. In a theoretical model, we show that unemployment, per se, does not affect migration. Rather, migration only occurs when unemployment shocks force residents to update their expectations of the area’s unemployment rate. Once these expectations change, migration reallocates labor to bring the economy back to equilibrium. Testing this theory, we devise an empirical strategy using state-level data in the US from 2000 to 2010. We estimate that the impact of unemployment shocks outside of expectations is over 25 times greater than the impact of unemployment shocks that are within expectations.

Date: 2015
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Working Paper: The Role of Expectations: An Application to Internal Migration (2012)
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