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The Geographic Mobility of Labor and the Rigidity of European Labor Markets

  • Gabor Kezdi


    (Institute of Economics, Hungarian Academy of Sciences, Budapest)

Regional unemployment and non-participation rates are higher, more disperse, and more stable in Europe than in the U.S. This paper helps understand what may cause this phenomenon. Specifically, it looks at the role of migration in regional differences. I analyze the adjustment mechanisms of regional labor markets in seven countries of continental Europe (Belgium, Germany, Spain, France, Italy, The Netherlands, and Portugal), and the United States. I develop a simple model to understand the role of migration in the adjustment mechanism and estimate comparative static parameters. Under demand shocks, migration elasticities are identified relative to other supply elasticities. I argue that comparative statics give more reliable results than the usual Vector Autoregression approach. I exclude part of the possible supply-induced variation in my analysis. According to the results, aggregate migration elasticities relative to other supply responses are significantly weaker in Europe than in the U.S. The differences are small for the economically most active cohorts, and the aggregate differences are driven primarily by the less active cohorts, both young and old. This suggests that the Europe-US differences in regional inequality are driven at least as much by stronger unemployment and non-participation responses than weaker migration.

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Paper provided by Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences in its series IEHAS Discussion Papers with number 0216.

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Length: 45 pages
Date of creation: Dec 2002
Date of revision:
Handle: RePEc:has:discpr:0216
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  1. Oliver J. Blanchard, 1997. "The Medium Run," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(2), pages 89-158.
  2. 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.
  3. Decressin, Jörg & Fatás, Antonio, 1994. "Regional Labour Market Dynamics in Europe," CEPR Discussion Papers 1085, C.E.P.R. Discussion Papers.
  4. Maurice Obstfeld & Giovanni Peri, 1999. "Regional Nonadjustment and Fiscal Policy: Lessons for EMU," NBER Working Papers 6431, National Bureau of Economic Research, Inc.
  5. Paolo Mauro & Antonio Spilimbergo, 1998. "How Do the Skilled and the Unskilled Respond to Regional Shocks? the Case of Spain," IMF Working Papers 98/77, International Monetary Fund.
  6. Timothy J. Bartik, 1991. "Who Benefits from State and Local Economic Development Policies?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wbsle, April.
  7. Alan Krueger, 1999. "From Bismarck to Maastricht: The March to European Union and the Labor Compact," Working Papers 803, Princeton University, Department of Economics, Industrial Relations Section..
  8. Krueger, Alan B., 2000. "From Bismarck to Maastricht: The March to European Union and the Labor Compact1," Labour Economics, Elsevier, vol. 7(2), pages 117-134, March.
  9. Bound, John & Holzer, Harry J, 2000. "Demand Shifts, Population Adjustments, and Labor Market Outcomes during the 1980s," Journal of Labor Economics, University of Chicago Press, vol. 18(1), pages 20-54, January.
  10. Pedro Portugal & Olivier Blanchard, 2001. "What Hides Behind an Unemployment Rate: Comparing Portuguese and U.S. Labor Markets," American Economic Review, American Economic Association, vol. 91(1), pages 187-207, March.
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