Migration and Unemployment Dynamics

The aim of this paper is to study the impact of labour migration on unemployment dynamics when labour markets are non com petitive. We consider a dynamic model with two regions where wages are locally negotiated at the firm level. We show that, in the long run, labour migration does not affect local unemployment rates but may modify the general level of unemployment. In the short run, labour migration between regions are likely to affect local unemployment rates. It may induce, momentarily, an increase in the unemployment rate of the immigration region and a decrease in the unemployment rate of the emigration region.