SPATIAL AUTOCORRELATION IN BRITISH UNEMPLOYMENT

ABSTRACT. The recent literature on local unemployment in Britain and the U.S. is reviewed, and a model estimated for Britain which is consistent with the findings of that literature. Spatial econometric techniques are applied to test and elaborate on that model. The results indmte the presence of significant spillovers in adjustments to local demand shocks. These spillovers occur over a wide spatial field and are strongest after a lag, suggesting that they reflect migration behavior. In addition, highly localized spatial interactions are found, consistent with commuting adjustments in response to shocks. Incorporating these effects eliminates spatial autocorrelation from the residuals. A simulation exercise is undertaken to demonstrate the effects of supply- and demand-side shocks on the model solution.     

UNEMPLOYMENT AND MENTAL HEALTH IMPLICATIONS FOR HUMAN SERVICE POLICY*

The psychiatric impact of involuntary job loss is evaluated in this paper in light of the attitude among some policy makers that contemporary unemployment is associated with minimal personal costs. Research bearing directly and indirectly on the mental health consequences of job loss is reviewed. Preliminary findings from an ongoing study of family and personal impacts of job loss in which this writer is engaged are also presented. The collective evidence of at least selective psychiatric effects of unemployment is then examined for its implications for human service policy especially in relation to the primary, secondary and tertiary prevention of mental illness.     

THE INFLUENCE OF ECONOMIC DIVERSITY ON UNEMPLOYMENT AND STABILITY*

ABSTRACT. For many years, regional scientists, economists, and geographers have been unable to clarify the influence of economic diversity on unemployment and instability in regional economies of the United States, the United Kingdom, and Canada. This article presents plausible theory, proper units of analysis, valid measures, and more inclusive models of the diversity-stability relationship. The findings are generalizable because the sample includes most metropolitan areas in the U.S. The empirical analysis estimates the influence of diversity, employment concentrated in unstable industries, population size, growth rate, and control variables on unemployment and employment instability during the 1972–88 period. The results indicate that metropolitan areas which are more diverse experience lower unemployment rates and less instability than areas which are less diverse.     

A NOTE ON REAL WAGE RIGIDITY AND STATE UNEMPLOYMENT RATES*

ABSTRACT This paper extends the research of Hyclak and Johnes (1989) in analyzing the relationship between the rigidity in real wages and state unemployment rates. It presents evidence contrary to the empirical findings of Hyclak and Johnes in that measures of real wage rigidity are not robust over time in explaining changes in state unemployment rates. Moreover, an alternative proxy accounting for divergent growth patterns across states does not significantly affect changes in state unemployment rates.     

THE PROBLEM OF HIGH UNEMPLOYMENT: RESULT OF MUDDLED NATIONAL ECONOMIC POLICIES

During 1953 through 1979 estimated, the U.S. economy has exhibited a roller-coaster economic performance–six periods of inadequate upturn, stagnation, and recession, with a chronic rise in unemployment because each upturn at its peak has tended to leave us with more unemployment than the previous one. During the period as a whole, we have forfeited 7.1 trillion 1978 dollars in GNP and 80.8 million years of civilian employment opportunities, and consequently lost about 1.8 trillion dollars in public revenues at all levels, with severe neglect of national priorities, and chronically rising Federal Budget deficits. This sorry record is due primarily to reliance upon a “trade-off” between unemployment and inflation. But empirical evidence for more than a quarter century has demonstrated that inflation rises as unused capabilities increase and vice versa. The annual inflation rate during the first half of 1979 exceeded 13 percent despite recession; it ranged from 1.6–3.0 percent during periods close to full employment. We now need thorough reconstruction of national economic policies, including abandonment of (1) the unemployment-inflation “trade-off,” (2) attempts to balance the federal budget at the expense of the economy and the people, (3) the prevalent monetary policy with soaring interest rates, and (4) excessive reliance on tax reductions in lieu of increased public outlays or investment. These changes would replace improvised and frequently conflicting national economic policies with comprehensive and coherent efforts. All this is in accord with the Humphrey-Hawkins Full Employment and Balanced Growth Act of 1978     

STRUCTURAL CHANGES IN LABOR DEMAND AND UNEMPLOYMENT IN LOCAL LABOR MARKETS*

ABSTRACT. It seems quite clear that the US. economy in the late 1970s and early 1980s was exposed to an accelerated rate of structural change resulting from energy price shocks, increased international competition and technological change. It is of considerable interest, then, that previous attempts to examine structural unemployment in this period find that structural shift in employment generally were not Significant determinants of the unemployment rate. This paper revisits this issue using a measure of structural job shifts drawn from the literature on establishment job creation and destruction. The results show that changes in the structure of labor demand across industry by establishment-size sectors had a statically significant and empirically important positive effect on the unemployment rate in a sample of 200 metropolitan labor markets during the 1976 to 1984 period.     

SECTORAL CHANGE AND UNEMPLOYMENT DURING THE GREAT RECESSION,IN HISTORICAL PERSPECTIVE

I examine the effect of sectoral change on U.S. state unemployment during the Great Recession. Of the 4.1 percentage point increase in mean state unemployment between 2007 and 2009, increased structural change explains 0.6–1.18 percentage points, and increased estimated effects of structural change 0.8–2.7 percentage points. Despite the role of housing in the recession, neither construction nor any other one sector can account for the results. Although the pace and role of structural change had returned to normal levels after the Great Recession, their effects persisted, raising mean state unemployment by 0.9–2.3 percentage points in 2011.     

RURAL–URBAN MIGRATION AND UNEMPLOYMENT: THEORY AND POLICY IMPLICATIONS*

ABSTRACT We develop a regional model where, in the city, unemployment prevails because of too high (efficiency) wages, while, in the rural area, workers are paid at their marginal productivity. We characterize the steady‐state equilibrium and show that it is unique. We then consider two policies: decreasing urban unemployment benefits and subsidizing urban employment. We find that decreasing the unemployment benefit in the city creates urban jobs and reduces rural–urban migration since new migrants have to spend some time unemployed before they can find a job in the city. On the other hand, raising employment subsidies increases urban employment but may also increase urban unemployment because it triggers more rural–urban migration. In this respect, the employment subsidy policy can backfire by raising rather than reducing urban unemployment.     

USING A COMPOSED ERROR MODEL TO ESTIMATE THE FRICTIONAL AND EXCESS-SUPPLY COMPONENTS OF UNEMPLOYMENT

ABSTRACT We present in this paper a plausible and simple method of estimating the two components (frictional and excess supply) of unemployment. This approach uses a stochastic model whose error term is composed of two elements–the usual two-sided error and a one-sided error. Our method has several strengths. First, we are able to explicitly model the universally held view that there is a nonzero lower bound on unemployment. Second, we can easily determine whether each region's unemployment rate is caused primarily by excess supply or frictional forces. We illustrate our technique on a data set comprised of all 50 states over the period 1960-1979. Finally, estimation of the frictional rates of unemployment allows us to analyze, in the last part of the paper, the underlying economic and demographic determinants of differences in frictional unemployment rates across states and over time.     

SEARCH FRICTIONS,UNEMPLOYMENT, AND HOUSING IN CITIES: THEORY AND POLICIES

We propose an urban search‐matching model with land development. Wages, unemployment, prices of housing and land are endogenously determined. We characterize the steady‐state equilibrium and then discuss the issue of efficiency. To explore interactions among markets, we implement comparative static analysis. We also consider three policies: an entry‐cost policy that reduces firms' entry, a transportation policy that reduces commuting costs, and a housing policy that decreases rental prices. We find that the transportation and housing policies are more efficient if the unemployment rate is low, while the entry‐cost policy is more efficient if the unemployment rate is high.     

THE IMPACT OF SKILL‐SPECIFIC MIGRATION ON REGIONAL UNEMPLOYMENT DISPARITIES IN GERMANY

Differences in regional unemployment are still pronounced in Germany, especially between eastern and western Germany. Although the skill level seems important for the relationship between regional disparities and labor migration, corresponding empirical evidence is scarce. Applying dynamic panel models, we investigate the impact of labor mobility differentiated by educational attainment of the workers on regional unemployment disparities between 2000 and 2008. The impact of low‐ and medium‐skilled migration is consistent with traditional neoclassical reasoning, suggesting that labor mobility reduces differences in regional unemployment rates. In contrast, the migration of high‐skilled workers tends to reinforce disparities.