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Regional Labor Market Adjustments in the United States and Europe

Author/Editor: Mai Dao | Davide Furceri | Prakash Loungani
Authorized for Distribution: February 11, 2014
Electronic Access: Free Full Text (PDF file size is 1,254KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: We examine patterns of regional adjustments to shocks in the US during the past 40 years. Using state-level data, we estimate the dynamic response of regional employment, unemployment, participation rates and net migration to state-relative labor demand shocks. We find that (i) the long-run effect of a state-specific shock on the state employment level has decreased over time, suggesting less overall net migration in response to a regional shock, (ii) the role of the participation rate as absorber of regional shocks has increased, (iii) the response of net migration to regional shocks is stronger, while that of relative unemployment is weaker during aggregate downturns, and (iv) the change in the response intensity of migration is related to the declining trend in regional dispersion of labor market conditions. Finally, using regional data for a set of 21 European countries, we show that while the short-term response of participation rates to labor demand shocks is typically larger in Europe than in the US, the immediate response of net migration in Europe has increased over time.
 
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Series: Working Paper No. 14/26
Subject(s): Labor markets | United States | Europe | Regional shocks | Labor mobility | Demand | Labor supply | Migration
 
English  
    Published:   February 11, 2014        
    ISBN/ISSN:   9781475598476/1018-5941   Format:   Paper
    Stock No:   WPIEA2014026   Pages:   37
    Price:   US$18.00
       
     
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