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Modelling Migration and Regional Labour Markets: An Application of the New Economic Geography Model RHOMOLO

The present paper describes the modelling approach of regional labour markets taken in the newly developed dynamic spatial general equilibrium model RHOMOLO, where the labour market equilibrium is determined by ?rms’ labour demand, a wage-curve with unemployment, and inter-regional labour migration. The RHOMOLO model is parameterised by estimating the key structural parameters econometrically. In order to illustrate the potential of the proposed dynamic spatial general equilibrium approach to inter-regionally integrated labour markets, we carry out simulations showing the e?ects of a reduction in ransportation cost, and assess the impact on regional labour markets. Our results con?rm that wages and unemployment are by far the most important channels of adjustment to macro-economic and policy shocks in the EU. In contrast, labour migration plays a secondary role in labour market adjustments in the EU. Our results also suggest that the relationship between market access, labour demand and labour supply is non-linear and spatially inter-dependent, which underlines the importance of the proposed dynamic spatial general equilibrium approach.

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Paper provided by Institute for Prospective and Technological Studies, Joint Research Centre in its series JRC-IPTS Working Papers with number JRC80825.

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Length: 29 pages
Date of creation: Mar 2013
Date of revision:
Handle: RePEc:ipt:iptwpa:jrc80825
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  5. Andries Brandsma & d’Artis Kancs & Philippe Monfort & Alexandra Rillaers, 2013. "Rhomolo: A Dynamic Spatial General Equilibrium Model for Assessing the Impact of Cohesion Policy," JRC-IPTS Working Papers JRC81133, Institute for Prospective and Technological Studies, Joint Research Centre.
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  16. d'Artis Kancs, 2011. "Labour Migration in the Enlarged EU: A New Economic Geography Approach," EERI Research Paper Series EERI_RP_2011_22, Economics and Econometrics Research Institute (EERI), Brussels.
  17. Jeffrey Grogger & Gordon H. Hanson, 2008. "Income Maximization and the Selection and Sorting of International Migrants," NBER Working Papers 13821, National Bureau of Economic Research, Inc.
  18. Sanz-de-Galdeano, Anna & Turunen, Jarkko, 2006. "The euro area wage curve," Economics Letters, Elsevier, vol. 92(1), pages 93-98, July.
  19. Pissarides, Christopher A & Wadsworth, Jonathan, 1989. "Unemployment and the Inter-regional Mobility of Labour," Economic Journal, Royal Economic Society, vol. 99(397), pages 739-55, September.
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  21. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages C1-33, March.
  22. Janos Varga & Jan in 't Veld, 2009. "A model-based analysis of the impact of Cohesion Policy expenditure 2000-06: simulations with the QUEST III endogenous R&D model," European Economy - Economic Papers 387, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  23. Sorensen, Todd A. & Fishback, Price & Allen, Samuel K. & Kantor, Shawn, 2007. "Migration Creation, Diversion, and Retention: New Deal Grants and Migration: 1935-1940," IZA Discussion Papers 3060, Institute for the Study of Labor (IZA).
  24. 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.
  25. d'Artis Kancs, 2010. "RHOMOLO: A Dynamic General Equilibrium Modelling Approach to the Evaluation of the EU's Regional Policies," EERI Research Paper Series EERI_RP_2010_28, Economics and Econometrics Research Institute (EERI), Brussels.
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