Labour Market Adjustment: Evidence on Interstate LabourMobility

In this paper, we investigate the behaviour of the Australian state labour markets, focusing on the role of geographic labour mobility. We find that interstate migration does play an important role in reducing differences in labour market conditions between states, although permanent (or very persistent) differences between state unemployment rates remain. We also find that out-migration from a state resulting from a relative downturn in its labour market occurs slowly and steadily. Most of the migration takes place, on average, within four years, and the process of adjustment is complete after seven years.