Past event
Department of Economics Seminar with Professor Mike Elsby, Edinburgh University Spatial Hysteresis
Professor Elsby is a Professor of Economics at the University of Edinburgh. His research focuses on the interface between macroeconomics and labour economics, in particular, unemployment and wage determination. Recent work has examined the measurement of labour market flows in developed economies, the modelling of worker and job flows over the business cycle and across firms, the economics of adjustment costs, the role of trend wage growth on long-term increases in joblessness, and the aggregate labour market effects of downward rigidity in wages.
Abstract: We devise a tractable model of persistent heterogeneity in mobility. The model admits analytical solutions for household values, migration flows, and the distribution of mobility types across space, a fundamental challenge posed by the environment. Central to tractability is that equilibrium mobility is ordered: locations facing adverse (favourable) shocks shrink (grow) via population flows in order of mobility type, starting with the most mobile. Spatial gaps emerge not only in labour market outcomes but also in the composition of mobility types. Spatial convergence involves closing both gaps and generically taking longer. Labour market outcomes display endogenous history dependence whereby locations with greater shares of mobile types exhibit greater resilience to adverse shocks. Auspicious locations are heterogeneous and feature high population churn; inauspicious locations become increasingly homogeneous and sclerotic. Confronting the model with data on population flows dating back to the 1960s, we find support for these predictions.