The role of migration in regional wage convergence: Evidence from Sweden 1860–1940

Abstract

Sweden experienced a decline in inter-county real wage differentials for agricultural workers between 1860 and 1940, historical evidence of early labor market integration well before widespread unionization in agriculture occurred. By means of dynamic panel data analysis, this paper examines whether internal and external migrations caused real wage beta convergence across Swedish counties. To account for statistical problems such as endogeneity of migration, time-invariant county characteristics and autocorrelation in the regression model, we adjust our estimates using fixed effects, instrumental variables and GMM. The preferred model shows that both internal and external migrations contributed to wage convergence before the First World War and internal migration mainly during the interwar years. The agglomeration effects of urbanization were not sufficiently pervasive to offset the labor supply effects of internal and external migrations.