What Attracts Human Capital? Understanding the Skill Composition of Interregional Job Matches in Germany

Abstract

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp06062.pdf Non-technical SummaryAccording to the New Theory of Economic Growth, a large pool of qualified workers facilitates innovative activities within a region and fosters its future economic growth. This means that there may be gains from inward migration of skilled individuals which reinforce rather than alleviate regional economic disparities. It is therefore important to develop a more profound understanding of how the destination choices of different skill groups drive the skill composition of internal migration flows in order to explain regional disparities in income and economic growth. Given the brain drain from eastern to western Germany, this question is particularly relevant in the German context. This paper examines the destination choice patterns of heterogenous job movers in order to identify the determinants of the skill composition of internal job matching flows in Germany.Recent European studies suggest that high-skilled individuals often relocate to high-density urban regions. The studies, however, do not clarify whether this is due to a mixture of higher urban wage premia, job opportunities or consumer amenities. This paper tries to fill this gapby investigating to what extent pecuniary and non-pecuniary factors may explain migration flows of heterogenous individuals in Germany.The estimates suggest that spatial job matching patterns by high-skilled individuals are mainly driven by interregional income differentials, while interregional job matches by lessskilled individuals are much more affected by regional differentials in job opportunities. Regional differentials in amenities (e.g. availability of public goods such as child care infrastructure) weakly contribute to spatial sorting processes in Germany due to higher amenity valuations of job-to-job movers than job movers after unemployment. Thus, differences in destination choices by skill level are partly driven by different spatial patterns of job-to-job matches and job matches after unemployment.The findings show that rising wage levels in eastern Germany during the 1990s have been an effective means of preventing a stronger brain drain. However, the cost of rising wages has been higher unemployment levels, the main effect of which has been to boost the east-west migration of less-skilled individuals. A simulated economic convergence between eastern and western Germany shows that higher wage level...

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