Can Regional Employment Disparities Explain the Allocation of Human Capital Across Space?

This paper examines the forces driving skill selectivity of regional migration in a context where modelling the migration decision as a wage-maximising process may be insufficient due to persistent employment disparities. The paper thus extends a Borjas type framework on the selectivity of internal migrants to allow migrants to move to regions that best reward their skills in terms of both wages and employment. This framework predicts that high-skilled workers are disproportionately attracted to regions with higher mean wages and employment chances as well as higher regional wage and employment inequalities. Estimates from a labour flow fixed effects model and a GMM estimator show that these predictions hold, but only employment disparities induce a robust and significant skill sorting. The paper thus establishes a missing link why employment disparities may actually be self-reinforcing.

Arntz, Melanie, Terry Gregory and Florian Lehmer (2014), Can Regional Employment Disparities Explain the Allocation of Human Capital Across Space?, Regional Studies 48 (10) , 1719-1738