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The Role of Borders, Languages, and Currencies as Obstacles to Labor Market Integration

  • Bartz, Kevin
  • Fuchs-Schündeln, Nicola

Based on a modified Spatiotemporal Autoregressive Model (STAR), we analyze whether borders still constitute significant impediments to labor market integration in the European Union, despite the formal law of free movement of labor. Using regional data from the EU-15 countries over 21 years, we find that this is the case. We further investigate whether the abolishment of border checks through the Schengen agreement or the introduction of the Euro improved our measure of labor market integration across borders, and do not find evidence in favor. Last, we investigate the role of languages, and potentially cultures, as obstacles to labor market integration. We find that indeed language borders play a larger role than country borders in explaining the lack of labor market integration across borders.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8987.

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Date of creation: May 2012
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Handle: RePEc:cpr:ceprdp:8987
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  1. James E. Anderson & Eric van Wincoop, 2001. "Gravity with Gravitas: A Solution to the Border Puzzle," NBER Working Papers 8079, National Bureau of Economic Research, Inc.
  2. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-23, June.
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  5. Falck, Oliver & Heblich, Stephan & Lameli, Alfred & Südekum, Jens, 2012. "Dialects, cultural identity, and economic exchange," Munich Reprints in Economics 20568, University of Munich, Department of Economics.
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  7. Paola Sapienza & Luigi Zingales & Luigi Guiso, 2006. "Does Culture Affect Economic Outcomes?," NBER Working Papers 11999, National Bureau of Economic Research, Inc.
  8. Jennifer Hunt, 2006. "Staunching Emigration from East Germany: Age and the Determinants of Migration," Journal of the European Economic Association, MIT Press, vol. 4(5), pages 1014-1037, 09.
  9. Hua Sun & Yong Tu & Shi-Ming Yu, 2005. "A Spatio-Temporal Autoregressive Model for Multi-Unit Residential Market Analysis," The Journal of Real Estate Finance and Economics, Springer, vol. 31(2), pages 155-187, September.
  10. Fuchs-Schündeln, Nicola & Izem, Rima, 2012. "Explaining the low labor productivity in East Germany – A spatial analysis," Journal of Comparative Economics, Elsevier, vol. 40(1), pages 1-21.
  11. George J. Borjas, 2001. "Does Immigration Grease the Wheels of the Labor Market?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(1), pages 69-134.
  12. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
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