Labour Market Externalities and Regional Growth in Sweden: The Importance of Labour Mobility between Skill-Related Industries

B<sc>oschma</sc> R., E<sc>riksson</sc> R. H. and L<sc>indgren</sc> U. Labour market externalities and regional growth in Sweden: the importance of labour mobility between skill-related industries, <italic>Regional Studies</italic>. This study investigates the relationship between labour market externalities and regional growth based on real labour flows. In particular, it tests for the importance of labour mobility across so-called skill-related industries between 435 four-digit industries within 72 Swedish functional regions (1998-2002). Both the fixed-effect models and generalized method of moments (GMM) estimates demonstrate that a strong intensity of intra-regional labour flows between skill-related industries impacts positively on regional productivity growth, but less so on employment growth. Labour mobility between unrelated industries tends to dampen regional unemployment growth while a high degree of intra-industry labour flows is only found to be associated with rising unemployment.