IDEC DP2 Series Volume 3 Issue 7
published_at 2013-11-19

Analyzing the impact of labor market integration

Nakajima Kentaro
Sato Yasuhiro
fulltext
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IDEC-DP2_03-7.pdf
Abstract
We develop a competitive search model involving multiple regions, geographically mobile workers, and moving costs. Equilibrium mobility patterns are analyzed and characterized, indicating that shocks to a particular region, such as a productivity shock, can propagate to other regions through workers' mobility. Moreover, equilibrium mobility patterns are not efficient due to the existence of moving costs, implying that they affect social welfare not only because they are costs but also because they distort equilibrium allocation. By calibrating our framework to Japanese regional data, we demonstrate that the impacts of eliminating migration costs are comparable to those of a 30% productivity increase.
Keywords
geographical mobility of workers
competitive job search
moving costs
labor market integration
JEL Classification Numbers: J61
JEL Classification Numbers: J64
JEL Classification Numbers: R23