ABSTRACT
This chapter introduces the study of regional labor markets by first reviewing the two types of labor market structures—perfect competition and monopsony. The local labor market is a major factor in determining the economic growth of an area, but even catastrophic changes in local labor demand could be just a ripple in the state or national labor market. Large urban areas and their peripheries are often competitive markets, especially for unskilled or semiskilled labor. However, if the labor market is perfectly competitive and either a union or the government imposes a minimum wage, the number of workers hired is determined by the demand curve. The monopsonistic labor model dominates most nonmetropolitan areas as well as labor markets for youth in urban areas. The local market structure is just one element in explaining regional wage differences. The chapter analyzes the three determinants of the local supply of labor: labor force participation rates, commuters, and migration.
