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Geography, Migrations and Equilibrium Unemployment

We study the effects of trade integration on the regional coevolution of income, migrations and unemployment in a dynamic core-periphery model with limited labor mobility and frictions in the job matching process. Our model can help explain a recently documented empirical puzzle, i.e., the divergence of unemployment rates, together with low migrations and modest income convergence experienced by European regions over the last twenty years. By studying explicitly the transitional dynamics of the model, we also highlight a contrast between short run and long run effects of trade and policy shocks on a geographically differentiated economy.

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File URL: ftp://ftp.unibocconi.it/pub/RePEc/cri/papers/wp128.pdf
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Paper provided by KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy in its series KITeS Working Papers with number 128.

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Length: 26 pages
Date of creation: Mar 2002
Date of revision: Jul 2001
Handle: RePEc:cri:cespri:wp128
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  1. Gianmarco I. P. Ottaviano & Diego Puga, 1998. "Agglomeration in the Global Economy: A Survey of the 'New Economic Geography'," The World Economy, Wiley Blackwell, vol. 21(6), pages 707-731, 08.
  2. Jansen, Marion & Turrini, Alessandro Antonio, 2000. "Job Creation, Job Destruction, and the International Division of Labour," CEPR Discussion Papers 2472, C.E.P.R. Discussion Papers.
  3. Robert J. Barro & Xavier Sala-i-Martin, 1991. "Convergence across States and Regions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 107-182.
  4. John M. Abowd & Richard B. Freeman, 1991. "Immigration, Trade, and the Labor Market," NBER Books, National Bureau of Economic Research, Inc, number abow91-1.
  5. Diego Puga, 1996. "The rise and fall of regional inequalities," LSE Research Online Documents on Economics 20643, London School of Economics and Political Science, LSE Library.
  6. Faini, Riccardo & Galli, Giampaolo & Gennari, Pietro & Rossi, Fulvio, 1997. "An empirical puzzle: Falling migration and growing unemployment differentials among Italian regions," European Economic Review, Elsevier, vol. 41(3-5), pages 571-579, April.
  7. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  8. Henry G. Overman & Diego Puga, 2002. "Unemployment clusters across Europe's regions and countries," Economic Policy, CEPR;CES;MSH, vol. 17(34), pages 115-148, 04.
  9. Christopher A. Pissarides, 1997. "The Impact of Employment Tax Cuts on Unemployment and Wages: The Role of Unemployment Benefits and Tax Structure," CEP Discussion Papers dp0361, Centre for Economic Performance, LSE.
  10. Costas Megir & Danny Quah, 1996. "Regional Convergence Clusters Across Europe," CEP Discussion Papers dp0274, Centre for Economic Performance, LSE.
  11. Quah, Danny, 1996. "Regional Convergence Clusters Across Europe," CEPR Discussion Papers 1286, C.E.P.R. Discussion Papers.
  12. Lars Ljungqvist & Thomas J. Sargent, 1998. "The European Unemployment Dilemma," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 514-550, June.
  13. Faini, Riccardo, 1996. "Increasing returns, migrations and convergence," Journal of Development Economics, Elsevier, vol. 49(1), pages 121-136, April.
  14. Bentolila, S, 1996. "Sticky Labor in Spanish Regions," Papers 9616, Centro de Estudios Monetarios Y Financieros-.
  15. Borjas, George J., 1999. "The economic analysis of immigration," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 28, pages 1697-1760 Elsevier.
  16. Barro, Robert J & Sala-i-Martin, Xavier, 1992. "Convergence," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 223-51, April.
  17. Quah, Danny T., 1996. "Regional convergence clusters across Europe," European Economic Review, Elsevier, vol. 40(3-5), pages 951-958, April.
  18. Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1999. "Trade and search generated unemployment," Journal of International Economics, Elsevier, vol. 48(2), pages 271-299, August.
  19. Maurice Obstfeld & Giovanni Peri, 1998. "Regional non-adjustment and fiscal policy," Economic Policy, CEPR;CES;MSH, vol. 13(26), pages 205-259, 04.
  20. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, June.
  21. George J. Borjas & Richard B. Friedman & Lawrence F. Katz, 1997. "How Much Do Immigration and Trade Affect Labor Market Outcomes?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 1-90.
  22. Pissarides, Christopher A, 1985. "Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages," American Economic Review, American Economic Association, vol. 75(4), pages 676-90, September.
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