Core-Periphery Dynamics and the Selection of Movers: Are Housing Market Forces Deglomerative?

This study examines the influence of agglomeration and deglomeration forces on residence-workplace location choices across skill groups. Contrary to the standard approach in economic geography, the focus on skills rather than people is particularly relevant in knowledge-based economies, where core-periphery dynamics are driven by skill disparities. Our case study examines the mobility of French-born workers within the Greater Region surrounding Luxembourg. Between 2005 and 2019, an estimated 38,445 additional workers aged 20-59 joined the Luxembourg economy, of which 25,801 were highly educated. We examine how wage differentials and housing costs, among other factors, have influenced migration and commuting patterns across skill groups. Our results show that while higher housing costs in core areas create deglomerative effects for low- and medium-skilled workers, high-skilled workers are more responsive to wage differentials and remain undeterred by rising housing prices. These forces alone have increased the number of tertiary-educated movers by 8,619 between 2005 and 2019, compared to 3,091 medium-skilled and 543 low-skilled. They substantially contributed to the doubling of the ”brain drain“ from the periphery to the core (from 12 to 24%) and to the widening of regional skill differentials. Overall, these findings underscore the need to look beyond people and consider skill differentials when modeling core-periphery dynamics or formulating policies to promote inclusive regional development.