A Panel VAR Approach for Internal Migration Modelling and Regional Labor Market Dynamics in Germany

Timo Mitze

Chapter Chapter 2 in Empirical Modelling in Regional Science, 2012, pp 19-52 from Springer

Abstract: Abstract This chapter analyzes the causal linkages between regional labor market variables and internal migration flows among German states between 1991 and 2006. We adopt a Panel VAR approach to identify the feedback effects among the variables and analyse the dynamic properties of the system through impulse–response functions. We also use the model to track the evolution of the particular East–West migration since re-unification aiming to shed more light on the East German “empirical puzzle”, characterized by lower migration responses than expected from the regional labor market position relative to the West. Indeed, we get evidence for such a puzzle throughout the mid-1990s, which is likely to be caused by huge West–East income transfers, a fast exogenously driven wage convergence and the possibility of East–West commuting. However, we also observe an inversion of this relationship for later periods: That is, along with a second wave of East–West movements around 2001 net flows out of East Germany were much higher than expected after controlling for its weak labor market and macroeconomic performance. Since this second wave is also accompanied by a gradual fading out of economic distortions and a downward adjustment of expectations about the speed of East–West convergence in standards of living, this supports the view of ‘repressed’ migration flows for that period.

Keywords: Labor Market; Regional Labor Market; Labor Productivity Growth; Human Capital Endowment; Labor Market Variable (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:spr:lnechp:978-3-642-22901-5_2

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DOI: 10.1007/978-3-642-22901-5_2

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