Regional Disparities and Labour Mobility: the Euro‐11 versus the USA

Abstract

In this paper we assess whether regional disparities in the euro area stimulate labour mobility, using migration behaviour in US states as a benchmark. Large regional disparities within European countries and size differences between them and US states led us to select regions as the appropriate unit of analysis for Europe. While the level of net immigration flows with respect to population is similar in the USA and the euro area, our study shows that its sensitivity to regional disparities differs considerably. Indeed, migration is much more significantly influenced by income disparities in the USA than it is in the Euro‐11, both in the short and the long term. Furthermore, the responsiveness of net migration inflows to shocks to the relative unemployment rate is negative in the regions of the USA, but nil in those of the Euro‐11. Finally, risk factors (identified in the theoretical model as the variance of income) are significant determinants of migration decisions in Europe but not in the USA.