Lagging Regions and Labour Market Dynamics in Brazil

Abstract

Agglomeration economies reinforce the economic activity concentration, stimulating unbalanced growth and uneven development. In this context, the development of lagging regions will largely depend on government intervention, as market forces by themselves are very unlikely to overcome polarisation effects, and may actually increase regional inequality. Within this context, migration helps to explain the spatial distribution of workers and the skill composition of the local labour force. At a first glance, migration should be able to equalise real regional wages, but it ends up reinforcing regional disparities. Therefore, this paper aims to investigate the relationship of migration and local labour market outcomes. It explores the role of the initial level of local development for the potential attraction of high-skilled workers and the effect different migration flows will have over local wages. The main results indicate that migration seems to reinforce regional disparities, through larger flows of skilled workers towards more developed centres and with local wages in these areas being positively affected by such flows.