Regional labor markets, network externalities and migration: the case of German reunification

Harald Uhlig ()

No 1311, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: Fifteen years after German reunification, the facts about slow regional convergence have born out the prediction of Barro (1991), except that migration out of East Germany has not slowed down. I document that in particular the 18-29 year old are leaving East Germany, and that the emigration has accelerated in recent years. To understand these patterns, I provide an extension of the standard labor search model by allowing for migration and network externalities. In that theory, two equilibria can result: one with a high networking rate, high average labor productivity, low unemployment and no emigration (?West Germany?) and one with a low networking rate, low average labor productivity, high unemployment and a constant rate of emigration (?East Germany?). The model does not imply any obviously sound policies to move from the weakly networked equilibrium to the highly networked equilibrium.

Keywords: German reunification; labor market search; network externalities; migration; regional economics (search for similar items in EconPapers)
JEL-codes: E24 J11 J21 J24 J61 J64 (search for similar items in EconPapers)
Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Regional Labor Markets, Network Externalities and Migration: The Case of German Reunification (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1311

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