Labour Mobility – An Adjustment Mechanism in Euroland? Empirical Evidence for Western Germany, France, and Italy

The purpose of this paper is to evaluate whether labour mobility is likely to act as a sufficient adjustment mechanism in the face of asymmetric shocks in Euroland. To this end, we estimate the elasticity of migration with respect to changes in unemployment and income on the basis of regional panel data provided by Eurostat, the statistical office of the European Union. Regression results are provided for Western Germany, France, and Italy. It is shown that labour mobility is highest in Germany, followed by France, and Italy. However, even in Germany, the accommodation of a shock to unemployment by migration takes several years. We conclude that labour mobility is extremely unlikely to act as a sufficient adjustment mechanism to asymmetric shocks in Euroland. Acknowledgement This research was undertaken with support from the ‘Deutsche Post – Stiftung’ (German Mail Foundation) under the project ‘Arbeitsmarkteffekte der Europäischen Währungsunion’ (Labour Market Effects of European Monetary Union). I thank my collegues Bernhard Boockmann, Thiess Büttner, Herbert S. Buscher, François Laisney, Claudia Müller, and Viktor Steiner for helpful comments. Furthermore, I would like to thank Werner Grünewald, Eurostat Luxembourg, for helpful information on Eurostat’s Regio databank. I received excellent research assistance from Stefan Leiderer. All remaining errors are my own.