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Labor migration can help dissipate asymmetric shocks within a currency union. However, if workers are complementary in production, heterogeneity in their geographic mobility may thwart the shock absorption capacity of integrated labor markets on adversely affected countries. We document a higher mobility of more educated Europeans, and develop a dynamic equilibrium model in which workers differ in skill and in their preference for migration. We calibrate this model to European data and find that following a negative shock to a country's productivity or demand integrated labor markets improve outcomes for high skilled workers, whereas low skilled workers in the affected (emigration) country see a slightly stronger loss in wages and welfare than if migration was prohibited. We show that fiscal integration in form of a European unemployment insurance primarily benefits low skilled workers, but can be welfare improving for all countries involved.
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EU-SILC-Bibliography
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Asymmetric Shocks and Heterogeneous Worker Mobility in the Euro Zone
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inproceedings
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CEPR-Bank of Italy Workshop: Labour Market Policies and Institutions
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In CEPR-Bank of Italy Workshop: Labour Market Policies and Institutions, 1-54, 2023
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18.09.2023-19-09.2023
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European Union Statistics on Income and Living Conditions (EU-SILC)
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2023
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SILC
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inproceedings
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transfer23
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