1. Local & Regional Economics Regional and Local Economics (RELOCE) Lecture slides – Lecture 5a 1 Inter-regional (Labour) Migration

2. Local & Regional Economics 2 RELOCE - Lecture 5a Last week: - Inter regional Trade This Lecture: - Inter regional labour migration Aims:  Examine classical theory of migration  Examine alternative theories  Examine what happens in periods of recession to see if migration is an equilibrating influence. Outcomes:  To understand the classical and alternative theories of labour migration  To be aware of some of the recent evidence of migration between UK regions  To understand how migration impacts on recessions Regional and Local Economics (RELOCE) Lecture slides – Lecture 5a

3. Local & Regional Economics 3 What are the assumptions of the Classical Model?  Perfect competition exists in all markets.  Constant returns to scale  No barriers to migration (e.g. factor migration is costless)  Perfectly flexible factor prices  Homogeneous factors of production  Complete information about factor returns in all regions Regional and Local Economics (RELOCE) Lecture slides – Lecture 5a

4. Local & Regional Economics 4 South’s Labour Market Real wage Employment SsSs DsDs W1W1 L1L1 Ss2Ss2 W*W* L* Ss1Ss1 W2W2 L2L2 Real wage Employment Ss1Ss1 DsDs W2W2 L2L2 North’s Labour Market Real wage Employment SNSN DNDN W1W1 L1L1 Real wage Employment SNSN DNDN W1W1 L1L1 SN1SN1 W*W* L* Regional and Local Economics (RELOCE) Lecture slides – Lecture 5a Adapted from Armstrong and Taylor (2000) pp 142

5. Local & Regional Economics 5 What happens in practice? Regional and Local Economics (RELOCE) Lecture slides – Lecture 5a

6. Local & Regional Economics Regional and Local Economic Analysis (RELOCE) Lecture slides – Lecture 9 6 1960-611965-661970-711975-761980-811985-861990-91 Northern-4.4-0.5 1.1-2.6-2.30.8 Yorkshire & Humberside -2.20.7-5.3-2.9-3.5-4.9-1.2 North West-1.7-0.5-4.1-4.7-8.1-7.5-2 East Midlands34.42.632.74.61.5 West Midlands2.2-0.6-2.7-5.3-4.4-4.6-1.5 East Anglia0.63.46.263.87.23.8 South East9.2-5.20.3-7.77.4-0.6-10.6 South West5.15.38.48.27.2136.6 Wales-1.9-0.30.11.7-0.710.5 Scotland-9.7-6.7-5.10.5-1.9-5.92 Peripheral Regions 2 -17.9-7.9-17.5-9.5-21.1-24.2-1.3 Conurbation Regions 3 7.5-5.6-11.8-20.6-8.6-17.6-15.3 Table 9.1 Net migration of working age males between regions of Great Britain: 1960-91 1 Source: Gordon and Molho (1998), based on the Census and NHSCR. Notes: 1. Figures are in thousands. 2. Consists of Northern, North West, Yorkshire & Humberside, Wales and Scotland. 3. Consists of South East, East Midlands, North West and Yorkshire & Humberside.

7. Local & Regional Economics 7 Gross flows are far larger than net flows, and mask a vast movement of people migrating for a range of economic and non- economic reasons Regional and Local Economics (RELOCE) Lecture slides – Lecture 5a Source: NHSCR Inter-Regional Migration Movements

8. Local & Regional Economics 8 Why is there perverse migration?  Labour is not homogeneous - includes workers with different skills.  Migration data also includes those not in the labour market.  Low-wage regions - high-wage locations for particular industry sectors.  Returning migrants moving back to their region of origin.  Some move for individual advancement, whilst others move as part of a career plan or because of company transfer policies (companies may move key workers around different plants). Regional and Local Economics (RELOCE) Lecture slides – Lecture 5a

9. Local & Regional Economics Regional and Local Economic Analysis (RELOCE) Lecture slides – Lecture 9 9 Districts Net out migration %Districts Net out migration % London332164%South East673045% North West432558% West Midlands 341544% Wales221150% East Midlands 401128% North East231148%East481327% Yorkshire and the Humber 211048%South West4524% Average37614948% Table 9.3 Inter district movements by working age residents 1998/99 Source: ONS Statbase 2000, Clark 2000 Migration of working age residents only

10. Local & Regional Economics 10 What are the Inadequacies of the Classical Model?  Differences in employment opportunities  Sticky wages.  Financial and psychic costs.  Migration “selective”  More likely to move between prosperous regions  Short distance  The institutional framework and the personal and family characteristics of migrants have an effect See article by Pissarides & Wadsworth Regional and Local Economics (RELOCE) Lecture slides – Lecture 5a

11. Local & Regional Economics 11 Strengths & Weaknesses  Based on more realistic assumptions  Explains “perverse migration”  good in theory but less successful in practice (due to modellers using limited variables)  does not explain how people acquire information The Human Capital Approach  Based on lifetime rather than current “earnings” Regional and Local Economics (RELOCE) Lecture slides – Lecture 5a

12. Local & Regional Economics 12 Strengths & Weaknesses  Mathematically complex  Incorporates reservation wage and hiring behaviour  Speculative or contracted migration  Takes account of lags Job Search Model  2 stage process Stay or leave region of origin? Migrant chooses from a selection of destinations Regional and Local Economics (RELOCE) Lecture slides – Lecture 5a

13. Local & Regional Economics 13 Strengths & Weaknesses  Uses less information about the individual migrant  Can be extended to incorporate economic variables Gravity models  Developed by geographers show aggregate flows Regional and Local Economics (RELOCE) Lecture slides – Lecture 5a

14. Local & Regional Economics 14 Effect of recession and question of whether or not migration is equilibrating?  Lower than expected returns to migrants during recession, greater uncertainty, liquidity constraints  Unemployment rates might have been higher without migration, helps reduce overheating  Migration can be beneficial to the individual after the initial period  Depressed region hit by “selective” migration  Positive multiplier effects in receiver regions, negative multiplier effect in departure regions  Capital and labour flow in the same direction, “push” factors most important to firms  Those who should benefit from migration are least likely to migrate (unemployed). Regional and Local Economics (RELOCE) Lecture slides – Lecture 5a

15. Local & Regional Economics 15 Conclusions  Migration does not conform strictly to the classical model.  Other factors are at play as well as real wage differentials.  Problem of the sluggish labour market.  Alternative models are better in theory at predicting regional migration because they take more factors into account.  Migration is only partly equilibrating.  In recessions job opportunities dry up and migration falls substantially.  It is only in long periods of boom that migration may start to erode regional employment and wage disparities. Regional and Local Economics (RELOCE) Lecture slides – Lecture 5a

16. Local & Regional Economics Regional and Local Economic Analysis (RELOCE) Lecture slides – Lecture 9 16 Inward migration1981198619911996 Eastern (E)121145122139 London (L)155183149168 South East (SE)202243198228 South West (SW)108149121139 Outward migration1981198619911996 North East (NE)39464145 North West (NW)8810194103 Merseyside (M)34372931 Yorkshire & Humberside (YH)73918598 Wales (W)42504753 Table 9.6 Gross inflows and outflows of migrants from selected regions of GB 1 : 1981-96 Source: Office for National Statistics, General Register Office for Scotland and National Health Service Central Register. Note 1. Figures are in thousands based on patients re-registering with NHS doctors in other parts of GB