Migration's inability to alleviate regional disparities: the grass is still greener on the other side of the fence
in: Peter Huber, Dieter Pennerstorfer, Digitalization, Urban Sprawl and Regional Economics – Selected Papers of the 10th WIFO Regional Economics Workshop at the
Austrian Institute of Economic Research, Vienna, 25-26 September 2017
This paper attempts to explain the seeming unresponsiveness of labour to react to economic disparities in terms of migration.
In theory, the potential of workers to implicitly alleviate regional disparities in, for example, unemployment or wage levels
by relocating appears potent, but finds little support empirically. To resolve this perplexity, a dynamic discrete choice
model is used, which translates into a two stage estimation strategy for recovering structural parameters. Investigating Austrian
bilateral movements on the NUTS 3 level from 2002 to 2014, the results suggest that this unresponsiveness builds on two pillars.
First, estimated average migration costs are in the range of six times the average annual wage, which appears sizable enough
to prevent taking advantage of economic opportunities for workers. These costs are shown to have decreased over time, though.
Second, the relatively high variation in the random utility shifter can be interpreted as relative unimportance of regional
disparities in forming migration decisions. Finally, a spatial approach on estimated regional valuations reveals an apparent
"beauty contest" of regions, where regions' own valuations suffer from proximity to highly attractive ones.
