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Do Migrants Follow Market Potentials? An Estimation of a New Economic Geography Model

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Author Info
Matthieu Crozet () (TEAM - Théories et Applications en Microéconomie et Macroéconomie - CNRS : UMR8059 - Université Panthéon-Sorbonne - Paris I)

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Abstract

New Economic Geography models describe a cumulative process of spatial agglomeration: Firms tend to cluster in locations with good access to demand, and similarly, workers are drawn to regions where market potential is high because the price index is lower there. This paper provides an empirical assessment of this forward linkage that relates labour migrations to the geography of production through real wage differentials. In the spirit of Hanson (1998), we use bilateral migration data for five European countries over the 1980s and 1990s to perform quasi-structural estimations of a new economic geography model derived from Krugman (1991). The results show strong evidence in favor of this model. As expected, migrants do follow market potential. Moreover, we provide estimates for all key parameters of the model. These estimates suggest that a sudden emergence of a core-periphery pattern is unlikely within European countries: centripetal forces are too limited in geographical scope, and mobility costs are too high.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00096277_v1.

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Date of creation: Aug 2004
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Publication status: Published, Journal of Economic Geography, 2004, 4, 4, 439-458
Handle: RePEc:hal:cesptp:halshs-00096277_v1

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Keywords: Agglomeration; economic geography; European regions; migration.;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. 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. [Downloadable!] (restricted)
  2. J. Peter Neary, 2001. "Of Hype and Hyperbolas: Introducing the New Economic Geography," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 536-561, June. [Downloadable!] (restricted)
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  3. Crozet, M. & Mayer, T. & Micchielli, J.L., 2000. "How Do Firms Agglomerate? A Study of FDI in France?," Papiers d'Economie Mathématique et Applications 2000.50, Université Panthéon-Sorbonne (Paris 1).
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  4. Krugman, Paul R & Venables, Anthony J, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 857-80, November. [Downloadable!] (restricted)
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  5. Puga, Diego, 1999. "The rise and fall of regional inequalities," European Economic Review, Elsevier, vol. 43(2), pages 303-334, February. [Downloadable!] (restricted)
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  6. Keith Head & Thierry Mayer, 2004. "Market Potential and the Location of Japanese Investment in the European Union," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 959-972, 01. [Downloadable!] (restricted)
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  7. Baldwin, Richard E., 2001. "Core-periphery model with forward-looking expectations," Regional Science and Urban Economics, Elsevier, vol. 31(1), pages 21-49, February. [Downloadable!] (restricted)
  8. Davis, Donald R. & Weinstein, David E., 1999. "Economic geography and regional production structure: An empirical investigation," European Economic Review, Elsevier, vol. 43(2), pages 379-407, February. [Downloadable!] (restricted)
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  9. Baier, Scott L. & Bergstrand, Jeffrey H., 2001. "The growth of world trade: tariffs, transport costs, and income similarity," Journal of International Economics, Elsevier, vol. 53(1), pages 1-27, February. [Downloadable!] (restricted)
  10. 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. [Downloadable!] (restricted)
  11. Devereux, Michael P. & Griffith, Rachel, 1998. "Taxes and the location of production: evidence from a panel of US multinationals," Journal of Public Economics, Elsevier, vol. 68(3), pages 335-367, June. [Downloadable!] (restricted)
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  12. Federico Trionfetti, 2001. "Using home-biased demand to test trade theories," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 137(3), pages 404-426, September. [Downloadable!] (restricted)
  13. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June. [Downloadable!] (restricted)
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  14. Keith Head & John Ries, 2001. "Increasing Returns versus National Product Differentiation as an Explanation for the Pattern of U.S.-Canada Trade," American Economic Review, American Economic Association, vol. 91(4), pages 858-876, September. [Downloadable!] (restricted)
  15. Gordon H. Hanson, 1998. "Market Potential, Increasing Returns, and Geographic Concentration," NBER Working Papers 6429, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
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  1. Maarten Bosker & Steven Brakman & Harry Garretsen & Marc Schramm, 2007. "Adding Geography to the New Economic Geography," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  2. Candau, Fabien, 2006. "The Spatial and Public Economics of Regions, a Theoretical and Empirical Survey," MPRA Paper 1153, University Library of Munich, Germany. [Downloadable!]
  3. Joeri Gorter & Albert Van der Horst, 2005. "New Economic Geography, Empirics, and Regional Policy," ERSA conference papers ersa05p236, European Regional Science Association. [Downloadable!]
    Other versions:
  4. Jordi Pons Novell & Javier Silvestre & Daniel Aurelio Tirado Fabregat & Elisenda Paluzie Hernandez, 2004. "Were Spanish migrants attracted by industrial agglomerations? An analysis for the interwar years in the light of the new economic geography," Working Papers in Economics 121, Universitat de Barcelona. Espai de Recerca en Economia. [Downloadable!]
  5. Florian Ploeckl, 2008. "Borders, Market Size and Urban Growth, The Case of Saxon Towns and the Zollverein in the 19th Century," Working Papers 966, Economic Growth Center, Yale University. [Downloadable!]
    Other versions:
  6. Rosa Sanchis-Guarner & Enrique Lopez-Bazo, 2006. "Are Skilled Workers More Attracted to Economic Agglomerations?," ERSA conference papers ersa06p120, European Regional Science Association. [Downloadable!]
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