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The Role of Borders, Languages, and Currencies as Obstacles to Labor Market Integration

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  • Bartz, Kevin
  • Fuchs-Schündeln, Nicola

Abstract

Based on a modified Spatiotemporal Autoregressive Model (STAR), we analyze whether borders still constitute significant impediments to labor market integration in the European Union, despite the formal law of free movement of labor. Using regional data from the EU-15 countries over 21 years, we find that this is the case. We further investigate whether the abolishment of border checks through the Schengen agreement or the introduction of the Euro improved our measure of labor market integration across borders, and do not find evidence in favor. Last, we investigate the role of languages, and potentially cultures, as obstacles to labor market integration. We find that indeed language borders play a larger role than country borders in explaining the lack of labor market integration across borders.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8987.

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Date of creation: May 2012
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Handle: RePEc:cpr:ceprdp:8987

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Keywords: European integration; labor market integration; spatial econometrics;

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  1. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
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  5. Guiso, Luigi & Sapienza, Paola & Zingales, Luigi, 2006. "Does Culture Affect Economic Outcomes?," CEPR Discussion Papers 5505, C.E.P.R. Discussion Papers.
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Cited by:
  1. Damiaan Persyn & Wouter Torfs, 2013. "A gravity equation for commuting - with an application to estimating regional and language border effects in Belgium," ERSA conference papers ersa13p599, European Regional Science Association.
  2. Jan Fidrmuc & Elira Karaja, 2013. "Uncertainty, Informational Spillovers and Policy Reform: A Gravity Model Approach," CEDI Discussion Paper Series 13-04, Centre for Economic Development and Institutions(CEDI), Brunel University.

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