Economic incentives versus institutional frictions: migration dynamics within Europe

Anindya S. Chakrabarti and Aparna Dutta

No WP2015-08-06, IIMA Working Papers from Indian Institute of Management Ahmedabad, Research and Publication Department

Abstract: The immobility puzzle in European Union takes the form that the observed level of migration within Europe is substantially less than is expected in an union which allows free labor mobility, indicating that there are possibly institutional barriers inhibiting migration. In order to pin down the missing mass of migrants, we propose a theory of cross-region migration in a multi-region setting with heterogeneity in sectoral compositions, productivity and endowments of productive inputs. Migration arises as the result of adjustment process of workers in response to uneven region and sector-specific shocks in factor productivity. When tested on U.S. which we consider to be a benchmark for institutional homogeneity, this model explains substantial part of variability in both the nominal and the relative levels of state-to-state migration. However, for Europe, the model explains the relative ow network well but predicts a higher nominal ow than is seen in the data illustrating the puzzle. Following the hypothesis that heterogeneity across European countries in institutional factors induce a friction on such labor reallocation process driven by economic incentives, we use dyadic regression to analyze the effects of pair-wise institutional distances which broadly captures various types of socio-cultural and political differences between countries, on the missing mass of migrants. Linguistic differences appear to be an important factor explaining the gap.

Date: 2015-08-25
New Economics Papers: this item is included in nep-eur, nep-mig and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.iima.ac.in/sites/default/files/rnpfiles/14480713042015-08-06.pdf English Version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iim:iimawp:13728

Access Statistics for this paper

More papers in IIMA Working Papers from Indian Institute of Management Ahmedabad, Research and Publication Department Contact information at EDIRC.
Bibliographic data for series maintained by ().