Modelling Migration and Regional Labour Markets: An Application of New Economic Geography Model Rhomolo
AbstractThe objective of the present paper is to study the impact of R&D investment on inter-regional labour migration and inter-sectoral labour reallocation in the EU, specifically at regional level. In order to capture important general equilibrium effects, we employ a structural NEG model called RHOMOLO. The RHOMOLO model is a dynamic spatial general equilibrium (DSGE) modelling framework capturing 270 NUTS2 regions in EU-27, and decomposing the economy into 6 sectors. The current base year of RHOMOLO, and to which structural parametersâ€™ estimates are used to calibrate the model, is 2007. As a first step of our analysis we econometrically estimate both (i) within country and (ii) across countries migration flows as a function of relative population, relative real wages per employee, relative unemployment rate and regional connectivity (as proxied by bilateral trade between origin and destination regions normalised by the total of their GDP). Our econometric findings suggest that within-country migration is subject to much the same economic forces as between-country migration, with estimates of the coefficients of relative wages and relative unemployment within in the same range. Secondly, we econometrically estimate the R&D and human capital elasticities, which are key parameters in the semi-endogenous growth module of RHOMOLO to assess the impact of R&D investment on TFP growth. In our next step we produce regional scenarios for R&D investments according to the objective of the Europe 2020 strategy and use them to simulate a shock in R&D investments at the regional levels needed to meet the Europe 2020 strategy. Finally, we combine the previous work together in order to simulate the impact on employment levels of regional R&D investments through the geographically heterogeneous effect that they have on migration flows and on labour supply in each EU region. The geographical distribution of R&D expenditures is shown to affect migration flows as well as employment levels at the regional level by increasing skills in those regions affected by R&D expenditures. Spillover effects on neighbouring regions are also observed.
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Bibliographic InfoPaper provided by European Regional Science Association in its series ERSA conference papers with number ersa12p808.
Date of creation: Oct 2012
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- Andries Brandsma & d’Artis Kancs & Damiaan Persyn, 2013. "Modelling Migration and Regional Labour Markets: An Application of the New Economic Geography Model RHOMOLO," JRC-IPTS Working Papers JRC80825, Institute for Prospective and Technological Studies, Joint Research Centre.
- Andries Brandsma & d'Artis Kancs & Damiaan Persyn, 2013. "Modelling Migration and Regional Labour Markets: An Application of the New Economic Geography Model RHOMOLO," Vives discussion paper series 36, Katholieke Universiteit Leuven, Faculteit Economie en Bedrijfswetenschappen, Vives.
- d'Artis Kancs & Andries Brandsma & Damiaan Persyn, 2013. "Modelling Migration and Regional Labour Markets: An Application of the New Economic Geography Model RHOMOLO," ERSA conference papers ersa13p262, European Regional Science Association.
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
- F22 - International Economics - - International Factor Movements and International Business - - - International Migration
- J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
- J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
- O - Economic Development, Technological Change, and Growth
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