After unification, real wages in Eastern Germany rose rapidly relative to labour productivity despite high and rising levels of unemployment. This substantial increase in wage levels relative to those in Western Germany is difficult to explain without recourse to models of union behaviour or...

The increase in dispersion of regional unemployment in the Czech Republic, despite low overall joblessness, is suggestive of low labour mobility. At the same time, standard matching functions estimated with district level panel data exhibit spatial instability. A simple model of non-sequential...

The need for locational competition among labour markets arises when labour is immobile. At the same time market clearing under such conditions can lead to wage and income variability. In such cases demand for insurance against regional shocks arises, which can be provided by nationwide...

Existing theories of unions emphasize their impact on wage levels relative to the opportunity cost of leisure. This paper explores the possibility that monopoly unions provide income insurance against idiosyncratic wage variability. An optimal union contract is characterized by real wage and...

The short- and longer-term regional consequences of migration for European aggregate supply are examined in a simple model in which human capital enters the production function externally. The planner chooses a reallocation of population across East and West that cannot be replicated by the...

Migration is an investment: it involves fixed, unrecoverable costs and uncertain future returns. If migration can be postponed, the option value of doing so may have positive value. Migration may not occur for a range of individuals who would otherwise migrate on a net present value basis. This...

The determinants of migration propensities of East Germans in the German Socioeconomic Panel are investigated. The option value of waiting is proposed to capture important aspects of the migration decision. Logit analysis of migration intentions reveals that age, rents, friends and relatives in...