Structural Estimation and Interregional Labour Migration: Evidence from Japan

This paper empirically tests relationships among interregional labour migration, wage, and real market potential (RMP) based on a multi-region economic geography model, which describes bilateral migration flows. We estimate a nonlinear gravity model using manufacturing workers' migration flows across the 47 Japanese prefectures. Estimates of structural parameters enable us to compute key variables of the model: price index, RMP, and real wage. We show that higher RMP regions can offer higher nominal wages. Furthermore, we find that an increase in the relative real wage of a region brings about a net increase in workers into the region.