Employment Illusion,Variable Costs of Migration and Labour Mobility

Why is internal migration in Italy so modest despite the presence of high differentials in employment rates? The paper proposes two different explanations. First, since migration is an investment with non-recoverable costs, it depends not only on the current differential between incomes in the two regions but also on expectations about the same differential in the future. Therefore, the existence of a relatively low differential between adult employment rates is a strong disincentive against migration in the presence of static expectations. The second explanation of the phenomenon is based on the role played by the network costs of migration. If they are important, it is evident that the changes and productive reallocations that have characterized the Italian economy in recent years are important in explaining the decline of migration.