Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/25786
Authors: 
Fenge, Robert
Meier, Volker
Year of Publication: 
2006
Series/Report no.: 
CESifo working paper 1741
Abstract: 
This paper investigates regional or international transfers as a means to prevent immigration into unemployment. We analyze a two-country model with free migration in which the rich country is characterized by minimum wage unemployment. Matching grants for investment in infrastructure are superior to wage subsidies because the former instrument leads to a stronger productivity growth in the poor country, reducing both migration flows and unemployment in the rich country. This result is shown to hold for a sufficiently low level of the regional policy budget. It explains the exclusive use of investment subsidies in the EU.
JEL: 
D62
H23
H54
H77
J61
R50
Document Type: 
Working Paper

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