Trade, migration and regional unemployment

Abstract

We formulate a dynamic core-periphery model with frictions in the job matching process to study the interplay between trade costs, migration and regional unemployment in the short-and long-run. We Þnd that the spatial distribution of unemployment mirrors (inversely) the distribution of economic activities. Further, we highlight a contrast between the short-run and the long-run effects of trade-induced migration on regional unemployment. In particular, an inßow of immigrants from the periphery into the core reduces the unemployment gap in the short-run, but exacerbates unemployment disparities in the long-run. JEL classiÞcation: F12, F15, F16.Keywords: Integration, Agglomeration, Search frictions, Labor mobility, Regional disparities. * We thank Daron Acemoglu, Giovanni Bruno, Francesco Daveri, Henrik Horn, Gianmarco Ottaviano, Torsten Persson, Diego Puga, Jaume Ventura, Fabrizio Zilibotti and seminar participants at IIES, Stockholm University, University of Cagliari and MIT. We are especially indebted to Robert Shimer and two anonymous referees for very generous and helpful comments. We thank Annika Andreasson for editorial assistance. The usual caveat applies.

Search unemployment and new economic geography

“…fani and Gancia (2005), who model regional unemployment by introducing search frictions to a dynamic NEG framework. In both cases, the equilibrium outcome is again higher unemployment in the periphery.…”

“…This is only a longrun equilibrium as long as transport costs are not too high, which would 6 In the case of Epifani and Gancia (2005), in-migration first increases unemployment in the core region. This effect is then reverted in the long run.…”

Agglomeration, Congestion, and Regional Unemployment Disparities

“…There exists another agglomeration pattern, especially when it comes to such models that integrate labor market frictions based on job matching into the New Economic Geography -such as the model of Epifani and Gancia (2005). Here, the agglomeration pattern is catastrophic since there is a certain range of transportation costs where both, agglomeration and symmetry are stable.…”

“…There already exist different models combining labor market frictions and the New Economic Geography. Epifani and Gancia (2005) for example introduce job-matching into the New Economic Geography. They show how disparities of regional economies endogenously arise and how these result in disparities of regional labor markets.…”

Migration, Trade and Unemployment

“…In general equilibrium trade models with capital and labor as production factors, constant returns to scale and perfect competition, immigration has an ambiguous effect on aggregate unemployment (see for example Brecher and Chen (2010)). To the contrary, with increasing returns to scale and monopolistic competition, immigration leads to a fall of unemployment (see Epifani and Gancia (2005) and Südekum (2005)). There are many good surveys about international migration and trade.…”