I nter - regional (Labour) Migration

1. Inter-regional (Labour) Migration Regional and Local Economics (RELOCE) Lecture slides – Lecture 5a

2. RELOCE - Lecture 5a Last week: - Inter regional Trade This Lecture: - Inter regional labour migration Aims: • Examine classical theory of migration • Examine alternative theories • Examine what happens in periods of recession to see if migration is an equilibrating influence. Outcomes: • To understand the classical and alternative theories of labour migration • To be aware of some of the recent evidence of migration between UK regions • To understand how migration impacts on recessions Regional and Local Economics (RELOCE) Lecture slides – Lecture 5a

3. What are the assumptions of the Classical Model? • Perfect competition exists in all markets. • Constant returns to scale • No barriers to migration (e.g. factor migration is costless) • Perfectly flexible factor prices • Homogeneous factors of production • Complete information about factor returns in all regions Regional and Local Economics (RELOCE) Lecture slides – Lecture 5a

4. South’s Labour Market North’s Labour Market Ss1 Real wage Real wage Real wage Real wage Ss SN W2 W1 W1 Ds L1 DN L2 L1 Employment Employment Employment Employment Ss1 SN1 Ss2 SN W2 W* W* W1 DN Ds L2 L* L* L1 Adapted from Armstrong and Taylor (2000) pp 142 Regional and Local Economics (RELOCE) Lecture slides – Lecture 5a

5. What happens in practice? Regional and Local Economics (RELOCE) Lecture slides – Lecture 5a

6. Table 9.1 Net migration of working age males between regions of Great Britain: 1960-911 Source: Gordon and Molho (1998), based on the Census and NHSCR. Notes: 1. Figures are in thousands. 2. Consists of Northern, North West, Yorkshire & Humberside, Wales and Scotland. 3. Consists of South East, East Midlands, North West and Yorkshire & Humberside. Regional and Local Economic Analysis (RELOCE) Lecture slides – Lecture 9

7. Gross flows are far larger than net flows, and mask a vast movement of people migrating for a range of economic and non-economic reasons Source: NHSCR Inter-Regional Migration Movements Regional and Local Economics (RELOCE) Lecture slides – Lecture 5a

8. Why is there perverse migration? • Labour is not homogeneous - includes workers with different skills. • Migration data also includes those not in the labour market. • Low-wage regions - high-wage locations for particular industry sectors. • Returning migrants moving back to their region of origin. • Some move for individual advancement, whilst others move as part of a career plan or because of company transfer policies (companies may move key workers around different plants). Regional and Local Economics (RELOCE) Lecture slides – Lecture 5a

9. Table 9.3 Inter district movements by working age residents 1998/99 Source: ONS Statbase 2000, Clark 2000 Migration of working age residents only Regional and Local Economic Analysis (RELOCE) Lecture slides – Lecture 9

10. What are the Inadequacies of the Classical Model? • Differences in employment opportunities • Sticky wages. • Financial and psychic costs. • Migration “selective” • More likely to move between prosperous regions • Short distance • The institutional framework and the personal and family characteristics of migrants have an effect See article by Pissarides & Wadsworth Regional and Local Economics (RELOCE) Lecture slides – Lecture 5a

11. The Human Capital Approach • Based on lifetime rather than current “earnings” Strengths & Weaknesses • Based on more realistic assumptions • Explains “perverse migration” • good in theory but less successful in practice (due to modellers using limited variables) • does not explain how people acquire information Regional and Local Economics (RELOCE) Lecture slides – Lecture 5a

12. Job Search Model • 2 stage process Strengths & Weaknesses • Mathematically complex • Incorporates reservation wage and hiring behaviour • Speculative or contracted migration • Takes account of lags Migrant chooses from a selection of destinations Stay or leave region of origin? Regional and Local Economics (RELOCE) Lecture slides – Lecture 5a

13. Gravity models • Developed by geographers show aggregate flows Strengths & Weaknesses • Uses less information about the individual migrant • Can be extended to incorporate economic variables Regional and Local Economics (RELOCE) Lecture slides – Lecture 5a

14. Effect of recession and question of whether or not migration is equilibrating? • Lower than expected returns to migrants during recession, greater uncertainty, liquidity constraints • Unemployment rates might have been higher without migration, helps reduce overheating • Migration can be beneficial to the individual after the initial period • Depressed region hit by “selective” migration • Positive multiplier effects in receiver regions, negative multiplier effect in departure regions • Capital and labour flow in the same direction, “push” factors most important to firms • Those who should benefit from migration are least likely to migrate (unemployed). Regional and Local Economics (RELOCE) Lecture slides – Lecture 5a

15. Conclusions • Migration does not conform strictly to the classical model. • Other factors are at play as well as real wage differentials. • Problem of the sluggish labour market. • Alternative models are better in theory at predicting regional migration because they take more factors into account. • Migration is only partly equilibrating. • In recessions job opportunities dry up and migration falls substantially. • It is only in long periods of boom that migration may start to erode regional employment and wage disparities. Regional and Local Economics (RELOCE) Lecture slides – Lecture 5a

16. Table 9.6 Gross inflows and outflows of migrants from selected regions of GB1: 1981-96 Source: Office for National Statistics, General Register Office for Scotland and National Health Service Central Register. Note 1. Figures are in thousands based on patients re-registering with NHS doctors in other parts of GB Regional and Local Economic Analysis (RELOCE) Lecture slides – Lecture 9