Routledge Dictionary of Economics, Second Edition
A geographical market which brings together buyers and sellers within a given area, often defined as a journey-to-work area in which employers and workers are in close contact with each other. CLASSICAL ECONOMISTS, following SMITH’S celebrated discussion of WAGE DIFFERENTIALS, believed that the free movement of workers in response to wage differentials would bring about an equalization of the net advantages of employment. Labour economists believe that there are fewer market imperfections, especially of an informational kind, in these local markets than in other labour markets. However, the conflict between INTERNAL and EXTERNAL LABOUR MARKETS has made it more difficult to see local markets of this kind functioning in a classical manner.
Also, the concept applies mostly to markets for less skilled workers. Managerial and professional workers consider themselves participants in the wider national and international labour markets.
See also: labour market; labour mobility
References
Robinson, D. (ed.) (1970) Local Labour Markets and Wage Structures, London: Gower.
Smith, A. (1776) The Wealth of Nations, ed. R.H.Campbell and A.S.Skinner, Book 1, ch. 10, Oxford: Clarendon Press, 1976.
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