Wage Inequality and Regional Labour Market Performance in the US

In the US, fluctuations in relative wages and employment across regional markets are very large. For example, during the so-called ‘Massachusetts miracle’ of the 1980s, average wages of men in New England increased by 17 percent, while wages in the ‘rustbelt’ states of the Midwest fell by about 8 percent. At the same time, annual weeks worked increased by about 4 weeks per person in New England, but fell by about 2 weeks in the Midwest. Changes such as these are apparently demand driven in the sense that wage and employment fluctuations are positively correlated over time (Juhn, Murphy and Topel, 1991).