Intra-European Labor Migration in Crisis Times

The question of whether migration can serve as a channel for regional adjustment to asymmetric shocks is crucial in an economic and monetary union. It is of particular interest within the Eurozone where countries do not have flexible exchange rates as an adjustment mechanism. By moving from countries with high unemployment to countries with better employment prospects, intra-European migrants should help countries to adjust to asymmetric shocks and lead to a more efficient allocation of resources within the free migration regime. This policy brief exploits the 2008 economic crisis to investigate how labor market disparities between EU15 countries affected intra-European migration. Our main contributions are threefold. First, over the period 2000-2013, we find that intra-European migration indeed responds to regional differences in employment conditions: a rise in unemployment differences between two EU15 countries fosters migration to the country with the better employment conditions. Second, we find that the 2008 economic crisis led to a strong reallocation of individuals within the EU15 between the southern countries (Greece, Italy, Portugal and Spain) which were the most affected by the crisis and the least affected countries, such as Denmark and the UK. Third, our results indicate that responsiveness to regional employment disparities is far greater among non-EU15 immigrants, compared to European-born people. This finding suggests that the mobility of Europeans within the EU15 could be greater, a hypothesis that is consistent with the higher mobility observed in the United States. Improving cross-country portability of social rights within the EU could thus be a relevant reform to foster intra-EU mobility.