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Interregional migration and labor market imbalances

Abstract.

This paper investigates the effects of internal migration in developed countries on widening wage inequality and high unemployment, and it addresses the geographical dimension of both problems. A two-region dynamic model is developed, which accounts for the skill composition of recent internal migration flows; it also innovates on the existing literature on migration by introducing capital-skill complementarity in the production function. The main conclusion is that migration can actually aggravate labor market imbalances. In a competitive set-up, migration temporarily amplifies the geographical dispersion of unskilled workers’ wages and raises the average wage premium of the economy. When wage rigidities are introduced, labor mobility increases regional dispersion of unskilled workers’ employment. In the short-run it may even reduce the total employment of the economy.

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Correspondence to Carlo Devillanova.

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A previous version of this paper circulated with the title “Migration Flows and Interregional Labor Market Disequilibrium”. I would like to thank Samuel Bentolila, Federico Biagi, Fabio Canova, Alessandra Casarico, Rosa Maria Fernandez, Juan Francisco Jimeno, Adriana Kugler, Javier Ortega, Ferdinando Regalia, Gilles Saint-Paul, Etsuro Shioji, Marco Vannini, two anonymous referees, participants at UPF Macro Workshop, 1997 ASSET meeting, Marseille, 1998 ESPE Annual Conference, Amsterdam, and 1999 Winter Meeting of the European Econometric Society, Rotterdam, for helpful comments and suggestions; Alix Beith for her friendly help. The usual disclaimer applies. Responsible editor: Allessandro Cigno.

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Devillanova, C. Interregional migration and labor market imbalances. J Popul Econ 17, 229–247 (2004). https://doi.org/10.1007/s00148-003-0156-z

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  • DOI: https://doi.org/10.1007/s00148-003-0156-z

Keywords

  • Internal migration
  • unemployment
  • wage inequality

JEL classification

  • E24
  • J31
  • R23