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Big Locational Differences in Unemployment Despite High Labor Mobility

Damba Lkhagvasuren

No 12002, Working Papers from Concordia University, Department of Economics

Abstract: 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.

Keywords: local labor market; mobility; local and aggregate unemployment; island model; search and matching model; local labor market dynamics (search for similar items in EconPapers)
JEL-codes: E24 J61 J64 J68 J11 R12 R13 (search for similar items in EconPapers)
Date: 2005-11, Revised 2012-02
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Working Paper: Big Locational Differences in Unemployment Despite High Labor Mobility (2007) Downloads
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