Testing the Validity of the Neoclassical Migration Model: Overall and Age-Group Specific Estimation Results for German Spatial Planning Regions

Abstract

This paper assess the empirical validity of the neoclassical migration model to predict German internal migration flows driven by regional labour market disparities. We estimate static and dynamic migration functions for 97 Spatial Planning Regions between 1996--2006 using key labour market signals including income and unemployment differences among a broader set of explanatory variables. Beside an aggregate specification we also estimate the model for age-group related subsamples. Our results give empirical support for the main transmission channels identified by the neoclassical framework: That is, regional differences in the real income show the expected effect on the net inmigration rate, while the link between regional unemployment rate differentials and net inmigration is negative. The results remains stable if further variables are added to the model. Net in-commuting shows a negative correlation with in-migration underlying the substitutive nature of the two variables. Moreover an increasing level of international competitiveness attracts further in-migration flows. We also find heterogeneity for different types of settlement structure and the East-West macro regions by including federal state level fixed effects or an East German dummy. The results broadly hold for age-group specific estimates. Here, the impact of labour market signals is tested to be of greatest magnitude for workforce relevant age-groups and especially young cohorts from 18 to 25 and 25 to 30 years. This latter result underlines the prominent role played by labour market conditions in determining internal migration rates of the working population in Germany.German Internal Migration, Harris-Todaro Model, Dynamic Panel Data