The effects of regional diversity on national unemployment through inter-regional migration: new evidence from Taiwan

Abstract

The relationship between diversity and unemployment has long been an important issue for regional scientists. This article applies quarterly data for four regions in Taiwan during the 1981–2004 period and the empirical results indicate that regional diversity can reduce the national unemployment rate, and this is solid support for the hypothesis of inter-regional migration. To further evaluate this, the interactions among regional unemployment rates are tested using the seemingly unrelated regression estimation approach, where the negative correlations of the regional residuals show that inter-regional migration is indeed an important common factor among regions. An isolated regional labour market with the highest unemployment rate in Taiwan re-confirms that inter-regional migration plays a critical role in lowering national unemployment. In sum, regional diversity can induce migration, which then reduces national unemployment.