Agglomeration,job flows and unemployment

This paper examines how job flows and unemployment vary across regions in the context of a New Economic Geography (NEG) model with equilibrium employment. The in-migration that results from agglomeration economies leads to higher rates of both job creation and job destruction. In-migration also leads to lower rates of unemployment suggesting that the regional effects of job creation on unemployment dominate those of job destruction, a result consistent with empirical evidence. Since higher rates of job destruction correspond to higher productivity the results demonstrate that a NEG model can provide a microfoundation for labor market pooling.     

The effects of industrial diversification on regional unemployment in Taiwan: is the portfolio theory applicable?

Unemployment issues, particularly recently, have been the subject of heated rhetoric in Taiwan due to the currently high unemployment rate in this small open economy. This paper investigates regional unemployment in 23 counties or cities from 1982 to 2004. Izraeli and Murphy (Ann Reg Sci 37:1–14, 2003) suggested that the Herfindahl index of industrial structure is positively correlated with the unemployment rate. In this regard, the portfolio theory argues that industrial diversification can only reduce volatility in the regional labor market. In other words, there is a relatively higher regional unemployment rate during periods of economic prosperity and relatively lower unemployment rate during periods of economic slowdown. This view is fully confirmed from the fixed effects model using panel data and the implication is that a comprehensive industrial policy to lower both the unemployment rate and risk in regional labor markets is critical in Taiwan today.     

Labor market frictions,agglomeration, and regional unemployment disparities

This paper constructs a footloose entrepreneur model with Diamond–Mortensen–Pissarides job search and matching frictions in the manufacturing sector. It captures unemployment adjustment both within the manufacturing sector and in the regional labor market. The within-sector unemployment rate is negatively affected by firm market access and is positively related to the intensity of firm screening among heterogeneous candidate workers. The regional unemployment rate, on the other hand, is related to the sectoral share of job searching across sectors within each region. We find the coexistence of a smaller within-sector unemployment rate and a larger local unemployment rate in the region with firm agglomeration. We also extend the analysis by examining the role of labor market frictions across sectors and the interdependence between agglomeration and unemployment.     

Agglomeration, congestion, and regional unemployment disparities

Regional labor markets are characterized by huge disparities between unemployment rates. Models of the New Economic Geography explain how disparities between regional goods markets endogenously arise but usually assume full employment. This paper discusses regional unemployment disparities by introducing a wage curve based on efficiency wages into the New Economic Geography. The model shows how disparities between regional goods and labor markets endogenously arise through the interplay of increasing returns to scale, transport costs, congestion costs, and migration. The level and stability of regional labor market disparities depends on the extend of labor market frictions.     

Inter-regional labor market equilibrium: another pattern of spatial mismatch

The inability of the free market to lead to a balanced regional labor market equilibrium has been explained to a certain extent by the spatial mismatch hypothesis: “housing segregation” explains a deadlock situation where a “center” with high unemployment and low income coexists with “suburbs” with high labor demand and income. The author proposes a framework for a theoretical general equilibrium model that may explain the existence of a spatial equilibrium with inequalities in employment and income in various regions. This model explains the interregional imbalances on the labor demand side due to the changes in relative land prices and agglomeration economies and diseconomies in three separate types of economic sectors. On the labor supply side, the model suggests a pattern of a commuting–migration relationship by which labor migrates for housing reasons while retaining present jobs and commuting back to them. Government intervention through influence on travel costs, education, and land allocation can lead to the diminution of such interregional gaps.     

MATCHING UNEMPLOYMENT AND VACANCIES IN REGIONAL LABOR MARKETS: AN EMPIRICAL ANALYSIS FOR THE NETHERLANDS

ABSTRACT In this paper we analyze regional developments in unemployment and vacancies in the Netherlands during the 1980s. Our purpose is to establish to what extent the differences in unemployment and vacancy rates are due to difference in regional labor market performance. The analysis is carried out by considering labor market dynamics using the concept of the matching function. We find a constant returns to scale matching function with coefficients of 0.25 for unemployment and 0.75 for vacancies. Efficiency rises substantially during the recession in the beginning of the 1980s. Regional differences in efficiency appear to be small for most regions, suggesting that a reduction in regional unemployment should by stimulating regional labor demand.     

Unemployment compensation and labor migration in search equilibrium model

The economics of unemployment compensation has attracted considerable attention over the past couple of decades in terms of positive analysis, but less attention has been devoted to labor migration issues in the job search equilibrium. In this study, we developed a rural–urban migration model where the urban labor market was characterized by job search during periods of unemployment. Characteristics of the steady state were analyzed and the unemployment compensation scheme was examined. From this model, we drew an inference of more or less migration occurring to the extent of how unemployment compensation was related to exogenous variables such as discounted gross income, urban rural productivity differentials, entry cost, and the employment tax rate.     

Migration and regional labor market adjustment: Chile 1977–1982 and 1987–1992

The main objective of this paper is to evaluate the migration processes that have been occurring in Chile between 1977–1982 and 1987–1992, as a market mechanism to re-allocate labor among regions. Using traditional consumer theory, a model is developed for a migrant who is evaluating migration. Secondly, this model is estimated, with cross section aggregate data, for both periods using a logit formulation. The results indicate that there is a strong force in the Chilean regional labor market, which serves to concentrate the workforce around the largest populated region of the country. Finally, regional labor markets are simulated to show that migration forces are very weak to arbitrage regional wages and unemployment rate and specific policy is required to promote balanced development across Chilean regions. Received: January 1999/Accepted: August 2001     

Regional labor markets in Finland: Adjustment to total versus region-specific shocks

This article analyses regional labor market adjustment in the Finnish provinces during 1976–2000. We investigate the inter-relations of employment, unemployment, labor force participation, and migration to see how a change in region-specific and total labor demand is adjusted. The analysis reveals that region-specific labor demand shocks adjust mainly via participation, whereas total shocks are adjusted by unemployment. The region-specific component of labor demand shock has shorter-lived effects on unemployment and participation, but its effect on employment is permanent. Conversely, total shocks leave no permanent effect. Migration is more important in the region-specific case where, after a few years, it acquires a large role in the adjustment process.     

Labor market efficiency and the dynamic behavior of regional unemployment differentials

In dynamic complex economies where unemployment is never zero, relative economic opportunities can be greatly effected by how evenly unemployment is distributed throughout the economy. Accordingly, a study of the temporal behavior of geographic differentials in unemployment rates will yield useful information about how well the labor market performs its resource allocation function. Using spectral methods, this paper tests the competitive theory predictions concerning the dynamic behavior of regional unemployment differentials. While there is evidence that unemployment rates tend to equalize, the results of this study indicate that it is a slow process in which competitive forces are relatively weak. As a result, the secular shift in employment growth from the North to the South and West has been the source of long run regional unemployment differences.     

Regional labor force participation and the discouraged worker hypothesis: Some empirical evidence

The purpose of this paper is to clarify the economic determination of the regional labor supply. In explaining the regional level of labor force participation two models are compared: the unemployment model based on the discouraged worker hypothesis and the neoclassical model of labor force participation. It is shown that a migration model complements the neoclassical model and provides an alternative interpretation of the discouraged worker hypothesis, this reinterpretation provides an explanation for the failure of the unemployment model at the regional level when it is quite successful at the national level.     

DOES MIGRATION EQUALISE REGIONAL UNEMPLOYMENT RATES? EVIDENCE FROM AUSTRALIA

Whether inter-regional migration equilibrates regional economic performance is a question which has received considerable attention in recent literature. The author examines that question, focusing upon regional unemployment rates and real wages within the context of a 24-hour equation econometric model of the interaction between regional wages, regional unemployment, and inter-regional migration in Australia. Used to solve for steady-state values of wage and unemployment differences, the model determined that the steady state involves non-zero unemployment rate differences and non-zero wage differences. The model is also used to investigate the stability of the equilibrating mechanism and to simulate the effects upon unemployment, migration, and wage rates of a shock to employment growth. The main findings are that inter-regional equilibrating forces are slow and do not help equalize regional unemployment rates or wages.     

The regional distribution of Spanish unemployment: A spatial analysis

In this article we propose a set of tools for analysing the regional distribution of unemployment. As we are interested in the characteristics of the distribution as a whole, results from a traditional regression analysis are complemented with those obtained by estimating its external shape before and after being conditioned to factors underlying regional unemployment. In addition, we specifically consider the spatial characteristics of the distribution, and the empirical model we develop to determine explanatory factors includes spatial effects. This framework is applied to the study of the provincial distribution of unemployment rates in Spain. Results point to increasing spatial dependence in the distribution of regional unemployment rates, and a change in the factors causing regional differentials over the last decade.     

Age cohort effects on unemployment in the USA: Evidence from the regional level

Since the early 1970s, it was argued that shifts from relatively smaller to larger youth cohorts in the labor force raise the unemployment rate. In contrast, using US state-level data, two studies come to a contrary conclusion. I provide a theoretical framework for local labor markets that considers age cohort differences in labor market characteristics. Using a spatial panel data model and US county-level data (2000–2014), the estimates provide strong evidence that aging of the working-age population reduces overall unemployment by almost 1 percentage point. Long-run effects that consider local feedbacks are even larger.     

Interregional labor migration and information flows

A model of interregional labor migration is developed that incorporates a complex system of information concerning migration and employment opportunities, as well as a heterogeneous population in which groups of workers differ in their assumed levels of skill, attitudes toward risk, and willingness to move. "Three channels are examined: interpersonal communication, general source information, and specific source information targeted at unemployed workers. In this process, trajectories of welfare levels (composed of wage plus nonwage benefits), information flows, vacancy and unemployment levels are generated for different worker and job types, regional aggregates, and the system as a whole. The behavior of the model is examined by means of numerical simulations and sensitivity analyses."     

Okun’s law,asymmetries and regional spillovers: evidence from Virginia metropolitan statistical areas and the District of Columbia

The purpose of this paper was to examine the strength of the relationship between unemployment and GDP, to determine the extent to which this relationship has been stable in Virginia metropolitan statistical areas (MSA) during the Great Recession and to examine the importance of regional spillovers in Okun’s law. Our results suggest that regional spillovers are very important in local labor markets and in defining the relationship observed at the national level. The MSA level data further supports asymmetries in Okun’s law. The weaker direct relationship between GDP and unemployment at the local level suggests that while federal fiscal and monetary policies to stimulate aggregate demand during periods of economic recovery may be effective, over time, in reducing the unemployment rate, local economic development policies are not effective in achieving the substantial short-term reduction in unemployment needed during recovery. The strong business cycle effects observed in the state MSA, relative to the U.S., suggests that countercyclical policies are fundamentally important and should be targeted more generally to exploit regional spillovers.     

Transition and unemployment in Central Europe: How redundant workers fare in regional labor markets

This study analyses whether redundant workers are stigmatized in regional labor markets, and if so, examines the severity of the effects. Stigmatization, possibly an outcome of statistical discrimination, is assumed to obtain whenever likelihoods of long-term unemployment are systematically elevated among otherwise equivalent individuals, due to involuntary job-loss. Such effects are considered during early transition in the Czech Republic, Slovak Republic and Poland, and within a modeling framework whereby current search duration (likelihood of long-term unemployment) and benefit receipt are jointly-determined. Although econometric estimates of long-term unemployment indicate significant and persistent stigmatization within the Slovak Republic and Poland; underlying causation apparently differs between countries. Received: 8 March, 2001 / Accepted: 19 December 2001 RID="*" ID"*"The authors wishes to thank the Luxembourg Employment Study (LES) for providing access to the five labor force surveys upon which this study is based, and is especially appreciative of assistance provided, on multiple occasions, by Elena Bardasi (former LES Coordinator). Appreciation is also extended to three anonymous referees for helpful comments and suggestions.     

House prices and regional labor markets

This paper examines some potentially significant interactions between local housing and labor markets. We use an error correction model with equations explaining the average manufacturing wage, the unemployment rate, the labor force and the average house price in an urban area. Estimates are reported for the Hartford, Houston, Fort Lauderdale and Milwaukee areas using quarterly data for the 1980s. We find some evidence that unemployment and labor force changes affect house prices and that house prices have a significant effect on the size of the labor force. Received: September 1995 / Accepted: January 1996