July 1, 2002

Migration and regional adjustment to asymmetric shocks in transition economies

Does migration facilitate regional adjustment to idiosyncratic shocks? The evidence from post-communist economies indicates that the efficacy of migration in reducing inter-regional unemployment and wage differentials has in fact been rather low.

High wages appear to encourage, and, similarly, high unemployment tends to discourage, overall migration - inbound and outbound - rather than induce a net flow from depressed regions to those with better economic conditions. Even when the impact of unemployment and wages on net migration is statistically significant, it is economically very small. Finally, migration flows have actually been declining in the course of transition, even as inter-regional disparities have been rising.