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

Melanie Arntz, Terry Gregory and Florian Lehmer

Regional Studies, 2014, vol. 48, issue 10, 1719-1738

Abstract: Arntz M., Gregory T. and Lehmer F. Can regional employment disparities explain the allocation of human capital across space, Regional Studies . This paper examines the determinants of skill-selective regional migration in a context where modelling the migration decision as a wage-maximizing process may be insufficient due to persistent employment disparities. Based on a Borjas-type framework it is shown 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 general methods of moments (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 about why employment disparities may actually be self-reinforcing.

Date: 2014
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DOI: 10.1080/00343404.2014.882500

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