Labor Market Theory and Models

Research output: Chapter in Book/Report/Conference proceedingChapter


This chapter reviews labor supply, demand, and equilibrium topics with the goal of showing how they determine labor market area (LMA) outcomes across geographic space. Labor supply curves are based on utility-maximizing choices between working and leisure, subject to a budget constraint, while labor demand curves are derived from the firm’s production function assuming profitmaximizing behavior. The challenges of defining and empirically delimiting LMAs are examined from historical perspectives and using statistical clustering analysis, with commuting data serving as a key tool. A key distinction is drawn between functional versus homogenous regionalization problems, and a number of suitable statistical approaches are reviewed. Current models used to study differences in earnings across labor markets as well as the effects of boom and bust cycles are also discussed. An empirical technique is presented for decomposing employment change within a community into four key labor market concepts: commuting, unemployment, labor force participation, and migration.

Original languageEnglish (US)
Title of host publicationHandbook of Regional Science
Subtitle of host publicationSecond and Extended Edition: With 238 Figures and 78 Tables
PublisherSpringer Berlin Heidelberg
Number of pages23
ISBN (Electronic)9783662607237
ISBN (Print)9783662607220
StatePublished - Jan 1 2021

All Science Journal Classification (ASJC) codes

  • Economics, Econometrics and Finance(all)
  • General Business, Management and Accounting
  • General Earth and Planetary Sciences
  • General Social Sciences

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