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Should I stay or should I go? The response of labor migration to economic shocks

Author

Listed:
  • Andrea Foschi

    (Bank of Italy)

  • Christopher L. House

    (University of Michigan and NBER)

  • Christian Proebsting

    (KU Leuven)

  • Linda L. Tesar

    (University of Michigan and NBER)

Abstract

We examine the responsiveness of labor participation, unemployment and labor migration to exogenous variations in labor demand. Our empirical approach considers four instruments for regional labor demand commonly used in the literature. Empirically, we find that labor migration is a significant margin of adjustment for all our instruments. Following an increase in regional labor demand, the initial increase in employment is mainly accounted for by a reduction in unemployment. Over time, however, net labor in-migration becomes the dominant factor contributing to increased regional employment. After five years, roughly 60 per cent of the increase in employment is explained by the change in population. The responses of labor migration are strongest for individuals aged 20-35. Based on historical data that go back to the 1950s, we find no evidence of a decline in the elasticity of migration to changes in employment.

Suggested Citation

  • Andrea Foschi & Christopher L. House & Christian Proebsting & Linda L. Tesar, 2025. "Should I stay or should I go? The response of labor migration to economic shocks," Temi di discussione (Economic working papers) 1489, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_1489_25
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    File URL: https://www.bancaditalia.it/pubblicazioni/temi-discussione/2025/2025-1489/en_tema_1489.pdf
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    More about this item

    Keywords

    labor mobility; migration; unemployment; regional labor markets;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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