Can Regional Employment Disparities Explain the Allocation of Human Capital Across Space?

A<sc>rntz</sc> M., G<sc>regory</sc> T. and L<sc>ehmer</sc> F. Can regional employment disparities explain the allocation of human capital across space, <italic>Regional Studies</italic>. This paper examines the determinants of skill-selective regional migration in a context where modelling the migration decision as a wage-maximizing process may be insufficient due to persistent employment disparities. Based on a Borjas-type framework it is shown that high-skilled workers are disproportionately attracted to regions with higher mean wages and employment chances as well as higher regional wage and employment inequalities. Estimates from a labour flow fixed-effects model and a general methods of moments (GMM) estimator show that these predictions hold, but only employment disparities induce a robust and significant skill sorting. The paper thus establishes a missing link about why employment disparities may actually be self-reinforcing.