ABSTRACT
Regional disparities in economic fortunes present a vexing problem in regional analysis. Disparities in wages, incomes, and unemployment between Canada's provinces and regions have a long history. This chapter discusses the relationship between different types of regional disparities, and in particular between wage and unemployment differentials. It suggests a strong, negative correlation between regional wages and unemployment. The traditional view of economics is that the migration of labor constitutes an "automatic" equilibrating mechanism in a country's regional system. Labor has a tendency to flow from regions with low wages and high unemployment to regions with high wages and low unemployment. Such models are difficult to implement empirically because of data requirements. Moreover, it is useful to explore the empirical validity of the simple model of the link between disparities and migration before proceeding to more complex versions. The model consists of three principal components: supply, demand, and wage adjustments.
