Discussion Paper Details

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Title: The Role of Borders, Languages, and Currencies as Obstacles to Labor Market Integration

Author(s): Kevin Bartz and Nicola Fuchs-Schündeln

Publication Date: May 2012

Keyword(s): European integration, labor market integration and spatial econometrics

Programme Area(s): International Macroeconomics

Abstract: Based on a modified Spatiotemporal Autoregressive Model (STAR), we analyze whether borders still constitute significant impediments to labor market integration in the European Union, despite the formal law of free movement of labor. Using regional data from the EU-15 countries over 21 years, we find that this is the case. We further investigate whether the abolishment of border checks through the Schengen agreement or the introduction of the Euro improved our measure of labor market integration across borders, and do not find evidence in favor. Last, we investigate the role of languages, and potentially cultures, as obstacles to labor market integration. We find that indeed language borders play a larger role than country borders in explaining the lack of labor market integration across borders.

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Bibliographic Reference

Bartz, K and Fuchs-Schündeln, N. 2012. 'The Role of Borders, Languages, and Currencies as Obstacles to Labor Market Integration'. London, Centre for Economic Policy Research.