This paper studies a two-region model in which unemployment, education decisions and interregional migration are endogenous. The poorer region exhibits both lower wages and higher unemployment rates, and migrants to the richer region are disproportionally skilled. The brain drain from the poor to the rich region is accompanied by stronger incentives to acquire skills even for immobile workers. Regional shocks tend to affect both regions in a symmetric fashion, and skilled-biased technological change reduces wages of the unskilled. Both education and migration decisions are distorted by a uniform unemployment compensation, which justifies a corrective subsidization.
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Paper provided by CESifo GmbH in its series CESifo Working Paper Series with number
CESifo Working Paper No. 2119.
Find related papers by JEL classification: H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies I20 - Health, Education, and Welfare - - Education - - - General J61 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Geographic Labor Mobility; Immigrant Workers J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search R10 - Urban, Rural, and Regional Economics - - General Regional Economics - - - General
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James Albrecht & Susan Vroman, 2002.
"A Matching Model with Endogenous Skill Requirements,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(1), pages 283-305, February.
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