A Model of Labour-Market Interdependencies in the London Region

Abstract

This paper develops an approach to the analysis of labour markets in a metropolitan region, emphasising the interdependencies between submarket areas arising from housing-related as well as employment-related migration and from induced shifts in commuting patterns. Three distinct migration streams with differing sensitivity to distance are identified and separately incorporated in a simultaneous equation model in which employment growth, unemployment, house construction, and house prices are also endogenous. Results are presented for estimation of this eleven-equation model with cross-sectional data for seventy-one areas in inner London, outer London, and the Outer Metropolitan Area. Important linkages are identified between the availability of rentable accommodation, labour migration and thus unemployment, between long-distance migration, and rates of private construction both in the areas of original destination and subsequent dispersal, and between intrametropolitan housing-related moves and the consequent decentralisation of employment. The distribution of new housing and employment opportunities, more than residential preference, is seen as the key factor in locational change within the region.

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