Education, Unemployment and Migration (Revised Version, 2009)
University of Freiburg - Institute of Public Finance; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
Wilfried Guth Chair of Constitutional Political Economy and Competition Policy
CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Ifo Institute for Economic Research at the University of Munich
August 20, 2009
This paper studies a two-region model in which unemployment, education decisions and interregional migration are endogenous. The poorer region exhibits both lower wages and higher unemployment rates, and migrants to the richer region are disproportionally skilled. The brain drain from the poor to the rich region is accompanied by stronger incentives to acquire skills even for immobile workers. Regional shocks tend to affect both regions in a symmetric fashion, and skilled-biased technological change reduces wages of the unskilled. Both education and migration decisions are distorted by a uniform unemployment compensation, which justifies a corrective subsidization.
Number of Pages in PDF File: 27
Keywords: Brain drain, Brain gain, Education, Unemployment, Interregional migration, Externalities
JEL Classification: H23, I20, J61, J64, R10working papers series
Date posted: September 19, 2009
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