Interregional wage differentials and the effects of regional mobility on earnings of workers in Germany

Abstract

"Regional migration of workers plays a substantial role in the adjustment process in the labour market. In the light of relatively low rates of internal mobility in Germany compared to Anglo-Saxon countries, this thesis analyses the effects of interregional mobility on the earnings of workers. In so doing, the thesis highlights the workers' differences in observable characteristics like gender, age or skill category and unobservable characteristics like intelligence or motivation. Using employment register data of the German Federal Employment Services we find, for instance, the returns to interregional mobility to be largest for young workers. Moreover, exploiting the panel structure of the data, we are able to identify the long-term wage growth effects of regional mobility. And, comparing regional movers and non-migratory establishment movers identifies the additional effect of regional mobility compared to local job-to-job mobility. Besides giving the best attention to the heterogeneity of workers, the empirical research on wage effects of mobility has to care about the heterogeneity of firms and regions. Among other analyses, we partition the sample of movers conditional on region of origin and destination and find that the wage growth returns are much higher, the less densely populated the region type of origin and the more densely populated the region type of destination. These results corroborate theoretical considerations: movers to more densely populated areas benefit from an overall higher wage level. Looking into the reasons for an urban wage premium, one can distinguish between short- and long-term effects. On the one hand, immediately after migration individuals should be compensated for high urban price levels; on the other hand the long-term wage growth should be higher, for instance due to wage-enhancing factors such as knowledge spillovers, which lead to workers' increasing ability over time. Our results indicate that price level effects do not play a role in explaining the wage growth effects of region-type mobility. Actually, finding pronounced wage growth effects, we are quite confident that externalities are an important determinant for the mobility wage growth premium. Further analyses confirm the view that these externalities are operating in the urban environment and not only within firms." (Author's abstract, IAB-Doku) ((en))

Cite article

Lehmer, F. (2010): Interregional wage differentials and the effects of regional mobility on earnings of workers in Germany. (IAB-Bibliothek 323), Bielefeld: Bertelsmann, 208 p. DOI:10.3278/300705w