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Unequal Pay or Unequal Employment? What Drives the Self-Selection of Internal Migrants in Germany?

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  • Terry Gregory

    ()

  • Melanie Arntz
  • Florian Lehmer

Abstract

This paper examines the determinants of internal migration in a context where wages tend to be rather inflexible at a regional scale so that regional labor demand shocks have a prolonged impact on employment rates. Regional income differentials, then, reflect both regional pay and employment differentials. In such a context, migrants tend to move to regions that best reward their skills in terms of both of these dimensions. As an extension to the Borjas framework, the paper thus hypothesizes that regions with a low employment inequality attract more unskilled workers compared to regions with unequal employment chances. By estimating a migration model for the average skill level of gross labor flows between 27 German regions, we find evidence in favor of this hypothesis. While rising employment inequality in a region raises the average skill level of an in-migrant, higher pay inequality in a region does not have a significant impact on the average skill level of its in-migrants. A higher employment inequality in Eastern as compared to Western Germany may, thus, be the missing link to explain the fact that East-West migrants tend to be rather unskilled.

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Bibliographic Info

Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa11p972.

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Date of creation: Sep 2011
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Handle: RePEc:wiw:wiwrsa:ersa11p972

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  1. Ravi Kanbur & Hillel Rapoport, 2005. "Migration selectivity and the evolution of spatial inequality," Journal of Economic Geography, Oxford University Press, vol. 5(1), pages 43-57, January.
  2. Benoit Dostie & Pierre Thomas Léger, 2006. "Self-selection in migration and returns to unobservable skills," Cahiers de recherche 06-01, HEC Montréal, Institut d'économie appliquée.
  3. George J. Borjas & Stephen G. Bronars & Stephen J. Trejo, 1992. "Self-Selection and Internal Migration in the United States," NBER Working Papers 4002, National Bureau of Economic Research, Inc.
  4. Arntz, Melanie, 2006. "What attracts human capital? Understanding the skill composition of interregional job matches in Germany," ZEW Discussion Papers 06-62, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  5. Johannes Gernandt & Friedhelm Pfeiffer, 2008. "Wage Convergence and Inequality after Unification: (East) Germany in Transition," SOEPpapers on Multidisciplinary Panel Data Research 107, DIW Berlin, The German Socio-Economic Panel (SOEP).
  6. Ashok Parikh & Michiel Van Leuvensteijn, 2002. "Internal Migration in Regions of Germany: A Panel Data Analysis," Economics Working Papers 012, European Network of Economic Policy Research Institutes.
  7. Herbert Brücker & Parvati Trübswetter, 2004. "Do the Best Go West?: An Analysis of the Self-Selection of Employed East-West Migrants in Germany," Discussion Papers of DIW Berlin 396, DIW Berlin, German Institute for Economic Research.
  8. Gary L. Hunt & Richard E. Mueller, 2004. "North American Migration: Returns to Skill, Border Effects, and Mobility Costs," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 988-1007, November.
  9. Ugo Fratesi & Massimiliano Riggi, 2004. "Migration and Regional Disparities: the Role of Skill Biased Flows," Urban/Regional 0407004, EconWPA.
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