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Geography, Migrations and Equilibrium Unemployment

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Abstract

We study the effects of trade integration on the regional coevolution of income, migrations and unemployment in a dynamic core-periphery model with limited labor mobility and frictions in the job matching process. Our model can help explain a recently documented empirical puzzle, i.e., the divergence of unemployment rates, together with low migrations and modest income convergence experienced by European regions over the last twenty years. By studying explicitly the transitional dynamics of the model, we also highlight a contrast between short run and long run effects of trade and policy shocks on a geographically differentiated economy.

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File URL: ftp://ftp.unibocconi.it/pub/RePEc/cri/papers/wp128.pdf
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Bibliographic Info

Paper provided by KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy in its series KITeS Working Papers with number 128.

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Length: 26 pages
Date of creation: Mar 2002
Date of revision: Jul 2001
Handle: RePEc:cri:cespri:wp128

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Keywords: Patents; Integration; Agglomeration; Regional unemployment; Europe;

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References

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  1. Ljungqvist, Lars & Sargent, Thomas J., 1997. "The European Unemployment Dilemma," Working Paper Series 481, Research Institute of Industrial Economics.
  2. George J. Borjas & Richard B. Friedman & Lawrence F. Katz, 1997. "How Much Do Immigration and Trade Affect Labor Market Outcomes?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 1-90.
  3. Ottaviano, Gianmarco Ireo Paolo & Puga, Diego, 1997. "Agglomeration in the Global Economy: A Survey of the 'New Economic Geography'," CEPR Discussion Papers 1699, C.E.P.R. Discussion Papers.
  4. Faini, Riccardo, 1996. "Increasing returns, migrations and convergence," Journal of Development Economics, Elsevier, vol. 49(1), pages 121-136, April.
  5. Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1999. "Trade and search generated unemployment," Journal of International Economics, Elsevier, vol. 48(2), pages 271-299, August.
  6. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  7. Quah, Danny, 1996. "Regional Convergence Clusters Across Europe," CEPR Discussion Papers 1286, C.E.P.R. Discussion Papers.
  8. Robert J. Barro & Xavier Sala-i-Martin, 1991. "Convergence across States and Regions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 107-182.
  9. Overman, Henry G. & Puga, Diego, 1999. "Unemployment Clusters Across European Regions and Countries," CEPR Discussion Papers 2255, C.E.P.R. Discussion Papers.
  10. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, January.
  11. Marion Jansen & Alessandro Turrini, 2004. "Job Creation, Job Destruction, and the International Division of Labor," Review of International Economics, Wiley Blackwell, vol. 12(3), pages 476-494, 08.
  12. Puga, Diego, 1997. "The Rise and Fall of Regional Inequalities," CEPR Discussion Papers 1575, C.E.P.R. Discussion Papers.
  13. Christopher A. Pissarides, 1997. "The Impact of Employment Tax Cuts on Unemployment and Wages: The Role of Unemployment Benefits and Tax Structure," CEP Discussion Papers dp0361, Centre for Economic Performance, LSE.
  14. John M. Abowd & Richard B. Freeman, 1991. "Immigration, Trade and the Labor Market," NBER Books, National Bureau of Economic Research, Inc, number abow91-1.
  15. Maurice Obstfeld & Giovanni Peri, 1998. "Regional non-adjustment and fiscal policy," Economic Policy, CEPR & CES & MSH, vol. 13(26), pages 205-259, 04.
  16. Henry G. Overman & Diego Puga, 1999. "Unemployment clusters across European regions and countries," LSE Research Online Documents on Economics 20211, London School of Economics and Political Science, LSE Library.
  17. Borjas, George J., 1999. "The economic analysis of immigration," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 28, pages 1697-1760 Elsevier.
  18. repec:fth:louvco:9864 is not listed on IDEAS
  19. Quah, Danny T., 1996. "Regional convergence clusters across Europe," European Economic Review, Elsevier, vol. 40(3-5), pages 951-958, April.
  20. Costas Megir & Danny Quah, 1996. "Regional Convergence Clusters Across Europe," CEP Discussion Papers dp0274, Centre for Economic Performance, LSE.
  21. Pissarides, Christopher A, 1985. "Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages," American Economic Review, American Economic Association, vol. 75(4), pages 676-90, September.
  22. Bentolila, S, 1996. "Sticky Labor in Spanish Regions," Papers 9616, Centro de Estudios Monetarios Y Financieros-.
  23. Faini, Riccardo & Galli, Giampaolo & Gennari, Pietro & Rossi, Fulvio, 1997. "An empirical puzzle: Falling migration and growing unemployment differentials among Italian regions," European Economic Review, Elsevier, vol. 41(3-5), pages 571-579, April.
  24. Barro, Robert J & Sala-i-Martin, Xavier, 1992. "Convergence," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 223-51, April.
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Citations

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Cited by:
  1. Niebuhr, Annekatrin & Stiller, Silvia, 2004. "Integration and Labour Markets in European Border Regions," HWWA Discussion Papers 284, Hamburg Institute of International Economics (HWWA).
  2. Basile, Roberto & Padoa Schioppa, Fiorella Kostoris, 2002. "Unemployment Dynamics of the 'Mezzogiornos of Europe': Lessons for the Mezzogiorno of Italy," CEPR Discussion Papers 3594, C.E.P.R. Discussion Papers.
  3. repec:iab:iabzaf:v:39:i:1:p:57-76 is not listed on IDEAS
  4. Stephen Drinkwater & Paul Levine & Emanuela Lotti & Joseph Pearlman, 2003. "The Economic Impact of Migration: A Survey," School of Economics Discussion Papers 0103, School of Economics, University of Surrey.

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