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Regions, frictions, and migrations in a model of structural transformation

Trevor Tombe ()

MPRA Paper from University Library of Munich, Germany

Abstract: Why do some regions grow faster than others? More precisely, why do rates of convergence differ? Recent research points to labour market frictions as a possible answer. This paper expands along this line by investigating how these labour market frictions interact with regional migration. Motivating this are two important observations: (1) farm-to-nonfarm labour reallocation costs have fallen, disproportionately benefiting poorer agricultural regions; and (2) migration flows vary dramatically by region, lowering (raising) marginal productivities in destination (source) regions. Using a general equilibrium model of structural transformation calibrated with US regional data over time, I find regional migration barriers magnify the income convergence effect of labour market improvements. For instance, recent research points to improved nonagricultural skills acquisition as a driver of Southern US convergence with the North. I find the strong link between labour markets and Southern convergence follows from the South’s historically extensive migration restrictions. Finally, the model captures the low convergence rates experienced by other regions, such as the US Midwest.

Keywords: structural change; regional migration; transportation costs; labour market frictions; regional convergence (search for similar items in EconPapers)
JEL-codes: O11 N1 E00 R11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo, nep-mig and nep-ure
Date: 2010-03-01
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