As part of the Vilfredo Pareto Research Seminar series, the International Economics Department at the Graduate Institute is pleased to invite you to the public talk
Quantifying the Benefits of Labor Mobility in a Currency Union, given by Christian Proebsting, Post-Doc at the Chair of International Finance, EPFL (coauthored with Christopher House and Linda Tesar).
Christian Proebsting is scientific collaborator at the École Polytechnique Fédérale de Lausanne. He received his Ph.D. in Economics at the University of Michigan in 2016. His research interests lie in the area of International Finance and mainly focus on the effects of fiscal, monetary and labor market policy in integrated economies. His research covers both the macroeconomic effects of these policies, as well as their impact on firm behavior. An additional line of research covers mergers and acquisitions in both emerging and developed countries.
Abstract
Unemployment differentials between European countries are much greater than un- employment differentials between U.S. states. In both regions, net migration responds to unemployment differentials, though the response is smaller in Europe compared to the United States. Mundell (1961) argued that factor mobility is an important precondition for a successful currency union. This paper explores to what extent the relative lack of labor mobility in Europe makes macroeconomic stabilization more difficult in the euro area. We develop a multi-country DSGE model with cross-border migration and search frictions in the labor market. We use European migration data to estimate the model’s structural parameters. The model allows us to quantify the benefits of increased labor mobility in Europe and to compare this outcome with a case of fully flexible exchange rates. Labor mobility and flexible exchange rates both work to reduce unemployment and per capita GDP differentials across countries provided that monetary policy is sufficiently responsive to national output.
The Vilfredo Pareto Research Seminar is our Departmental weekly seminar, featuring external speakers in all areas of economics. The organizer for this academic year is Prof. Julia Cajal-Grossi(julia.cajal@graduateinstitute.ch)