Regional Mobility and Geography
AbstractLarger countries should have a higher degree of interregional mobility of labor. A model of regional migration is calibrated for the U.S. and Europe in order to asses the importance of this effect. The model is able to replicate the observed patterns. By reversing the sizes, the mobility patters of U.S. and the European countries are also reversed. This observation implies that the increase in effective size associated with the European Union will transform Europe in to an optimum currency area. The methodology used to approximate the recursive problem may be of independent interest.
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Date of creation: Jul 1999
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Optimum currency areas; interregional labor mobility; approximation of dynamic programming problems; social interactions;
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