LSE: Commuting, Migration and Local Joblessness (PDF)

This is the best tl;dr I could make, original reduced by 98%. (I'm a bot)

In Section 3, we derive a crucial result which underpins our model: the local welfare of residents in an area can be written as a function of the local employment rate and the utility of being unemployed.

Allowing for sluggish adjustment of local population4 , Amior and Manning show how the su?cient statistic result gives rise to an error correction mechanism: local population growth depends on contemporaneous employment growth and the lagged employment rate, which represents initial local di?erentials in welfare.

The su?cient statistic result allows us to reduce the expected utility of residing in an area to just two dimensions: the local out-of-work utility and the local employment rate.

We begin with a model of commuting; and we then consider the determination of local wages, and ultimately, the employment rates of local residents - our su?cient statistic for local economic opportunity.

The ?rst is a weighted average of local Bartiks, b ωab log Xbt , where ωab is the fraction of employed area a residents who commute to area b. And the second is the local Altonji-Card instrument described above.

We impute 1961 local industrial composition using the 1971 local industry employment counts and national-level employment growth by industry over 1961-71; and assuming that industry i employment in every geographical area grew at the national industry i rate over 1961-71.

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