Does wage differential driven migration continue to exist? Tests on the role of regional economic structure in wage differential driven migration

Abstract

This paper explores the role of regional economic structure in the wage differential driven migration among the US Metropolitan Statistical Areas for three discrete time periods from 1993 to 2004. Rapidly increasing interregional trade attributes to the restructuring process of production internationally and interregionally. Both trade and migration can contribute to the equilibrium conditions in regional labor markets. When fragmentation increases intra-industry trade (IIT) in interregional trade, do we expect to see the increasing roles of interregional trade toward the equilibrium condition in regional labor markets? Fragmentation may force some production stages to the other regions, in other words, firms may benefit from relocating to the regions where they can minimize labor costs with cheaper wage rates. In this restructuring process, similarities in regional economic structures may increase the volumes of IIT and as a result, we may expect to see the increasing complementary role of trade in factor price equalization to migration. In contrast, when regional economic structures are quite different, migration rather than trade plays more important role in factor price equalization. Consequently, the main flows of interregional migration caused by wage differentials are more likely to be found among the regions where regional economic structures are dissimilar.