Interregional equilibrium with heterogeneous labor

The impact of labor migration on interregional equilibrium is studied when workers are heterogeneous in productivity and regional mobility, The skilled respond to market disequilibrium by moving into the most attractive region. The unskilled are immobile in the short-run and move with the skilled in the long-run, Both regions have a neoclassical production function affected by an externality depending on the number of skilled, Workers move according to the utility differential when regional amenities vary with population or according to the wage differential, The equilibrium pattern depends on the unskilled's mobility and on migration incentives, Typically, regional imbalance characterizes the equilibrium which is often suboptimal.