REGIONAL EARNINGS AND UNEMPLOYMENT ‐ A SIMULTANEOUS APPROACH
| Author | D. N. Manning,D. H. Blackaby |
| Published date | 01 November 1992 |
| DOI | http://doi.org/10.1111/j.1468-0084.1992.mp54004001.x |
| Date | 01 November 1992 |
OXFORD BULLETIN
of
ECONOMICS and STATISTICS
OXFORD BULLETIN OF ECONOMICS AND STATISTICS, 54,4(1992)
0305-9049 $3.00
REGIONAL EARNINGS AND
UNEMPLOYMENT - A SIMULTANEOUS
APPROACH
D. H. BlackabyandD. N. Manning
1. INTRODUCTION
There has been considerable interest shown in the interactions between the
housing and labour markets in Britain over the past few years and a number
of hypotheses have been advanced which have important policy implications.
Rising earnings may well lead to rising house prices yet changes in house
prices may also have important effects in the labour market. The literature
concentrates on two ley effects: house prices, hence housing costs, enter the
cost-of-living and may therefore be expected to influence earnings; regional
differences in housing costs partially determine the relative attractiveness of
regional migration. These two effects ultimately feed through to earnings and
unemployment since firms will tend to locate out of high-cost locations which
depresses local labour demand and net out-migration from higher house
price areas reduces local labour supply.
The Implications for Regional Migration
The work of Hughes and McCormick (1981, 1985, 1987) investigates the
importance of local housing policies for the regional mobility of labour.
Tenure is found to be an important determinant of labour mobility and those
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in Local Authority tenures are the least mobile geographically. This may
follow from the lack of alternative Local Authority housing in the intended
destination region and the unwillingness to relinquish an existing tenancy at a
rental which may be below the free market level. Alternatively, it may reflect
unobserved heterogeneity since those in Local Authority tenure may be the
least motivated; certainly they appear to have higher rates of unemployment
but lower rates of regional migration. In addition, potential Local Authority
tenants have been faced with changes in the allocations system to favour
those on the lowest incomes and the existing tenants have benefited from the
'right-to-buy' legislation. Those in existing Local Authority tenancies fre-
quently lack the financial assets required for a deposit on a house. These
factors may have had the effect of creating a 'pauperization' or 'residualiza-
tion' of a shrinking Council housing sector since it has increasingly become a
tenure of last resort (see Forrest and Murie, 1990).
Recent work by Jackman and Savouri (1991) investigates regional migra-
tion by analysing flows constructed from the NHS central register for the
period 1975-1989. The paper confirms many of the conclusions from analy-
sis of micro data by Hughes and McCormick and by Pissarides and
Wadsworth (1989). Jackman and Savouri find regional unemployment to be
an important determinant of inter-regional migration flows. Higher regional
unemployment both reduces in-migration and increases out-migration flows
which is consistent with the conclusions of Pissarides and Wadsworth.
Furthermore, higher levels of long-term regional unemployment tend to
reduce out-migration flows and this reflects lower search intensities
according to Jackman and Savouri. The temporal variation in overall migra-
tion rates is, however, chiefly accounted for by the time-series variation in the
aggregate level of job engagements. Overall migration flows vary from a low
of 1.4 percent of total population in 1981 upto a peak of almost 4.3 percent
in 1988. The rates of in- and out-migration show considerable variation by
region but the net migration rates are very low, with the possible exception of
the South West.' In general, migration rates are influenced by economic
factors in the direction predicted by theory but tend to be rather small and
have failed to eliminate the substantial variations in regional unemployment
which have been a persistent feature of the British economy.
Minford et al. (1988) investigate the role of the social security system in
reducing internal migration within Britain. These effects may follow from the
disincentives produced by a uniform social security benefits system which has
little or no spatial variation in the nominal rates levels of benefit. These dis-
incentive-to-migrate effects are reinforced by significant regional differentials
in the cost-of-living which, by and large, reflect differences in the local cost of
housing. The disincentive to migrate is accentuated by the inflexibility of local
authority housing as noted by the authors above.
'In 1986, the net migration rates were highest for the South West at 1.1 percent of total
population but were below 0.5 percent for every other region.
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