Regional skill endowments, employment structure, and international migration in the European Union, 1988-2005

This paper investigates international migrations patterns by skill and by region across the European Union during the period 1988-2005, which is characterised by substantial economic integration and further geographic enlargement. After presenting some facts about the regional distribution of skills of natives and foreigners, and their evolution over time, we develop a theoretical model where there is international trade and where both skilled and unskilled labour can move, and be employed in either a tradable or a non-tradable sector. The predicted skill distribution of natives and foreigners from both within and outside the European Union across regions is then tested using data from Eurostat’s Labour Force Survey. The empirical results suggest that despite some tendency towards skill concentration, migrants actually reduce cross-regional variations in skill endowments across the EU, hence the persistence of regions with above-average skill endowments reduces over time. The results also show that the concentration of skills is directly related to the size of the non-tradable sector. Against the fear that closer economic ties among member states might lead to the creation of super-regions where all skilled workers converge, these findings support a more balanced view of the effects of migration in the presence of international trade, as per the Hecksher-Ohlin model, and the possible need for a regional, rather than European, migration policy.