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Do Migrants Follow Market Potentials? An Estimation of a New Economic Geography Model

  • Matthieu Crozet


    (TEAM - Théories et Applications en Microéconomie et Macroéconomie - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

New Economic Geography models describe a cumulative process of spatial agglomeration: Firms tend to cluster in locations with good access to demand, and similarly, workers are drawn to regions where market potential is high because the price index is lower there. This paper provides an empirical assessment of this forward linkage that relates labour migrations to the geography of production through real wage differentials. In the spirit of Hanson (1998), we use bilateral migration data for five European countries over the 1980s and 1990s to perform quasi-structural estimations of a new economic geography model derived from Krugman (1991). The results show strong evidence in favor of this model. As expected, migrants do follow market potential. Moreover, we provide estimates for all key parameters of the model. These estimates suggest that a sudden emergence of a core-periphery pattern is unlikely within European countries: centripetal forces are too limited in geographical scope, and mobility costs are too high.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00096277.

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Date of creation: Aug 2004
Date of revision:
Publication status: Published in Journal of Economic Geography, Oxford University Press (OUP): Policy F, 2004, 4 (4), pp.439-458
Handle: RePEc:hal:cesptp:halshs-00096277
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  1. 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.
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