This chapter analyzed the location choice of migrants to the EU 13 with a special focus on differences in the determinants of location choice by skills. The results show that the location decisions of migrants in the 13 EU-countries considered are mostly governed by income opportunities, labor market conditions like unemployment, the ease of access to labor market, ethnic networks, a common official language as well as the design of the tax system (tax and social security rates, progressivity of the tax system). We do, however, not find strong evidence for the welfare magnet hypothesis – the hypothesis that migrants are attracted to countries or regions with generous welfare benefits. Surprisingly, we find a positive impact of over-qualification among highly skilled workers on the probability of choosing a region, which may be due to endogeneity problems.
Highly skilled workers are more attracted to larger regions, especially capitals, with good income opportunities. Ethnic networks of other highly skilled migrants from the same country of origin already living in the region increase the attractiveness of a region for highly skilled migrants. Ethnic networks of migrants with lower skill levels do, however, not decrease the attractiveness of a region (except for migrants from the EU 15). The same holds true for networks in neighboring regions, as well as networks in second neighbor regions. Thus, as in previous studies (see Zavodny, 1999, Pedersen – Pytlikova – Smith, 2008), we conclude that networks are the main factors determining the location choices of highly skilled migrants. Furthermore, we improve upon the previous literature by showing that networks in neighboring and second neighbor regions also play an important role for location decisions. Language knowledge also plays an important role for highly skilled migrants' location decisions. The odds41 of a highly skilled migrant moving to a region in a country which shares a common official language with his home country are – all else equal – 2.3 to 5.7 times larger. Easier access to the labor market also increases the probability of choosing a specific country/region for migrants outside the EU 15. Highly skilled migrants are also attracted to regions with lower taxes and a lower progressivity of the tax system. Furthermore a higher quality of the schooling system also increases the attractiveness of a country for highly skilled workers. Concerning other variables used to capture the generosity of the welfare system, all regressions show that a larger pension replacement rate increases the probability of moving to a region for highly skilled individuals. In general, we, however, find only weak support for the welfare magnet hypothesis among high-skilled workers.
Comparing the effects of the variables considered on the location decisions of low, medium and high skilled workers, two robust findings with important policy implications can be identified. The first is that skill-differentiated ethnic networks have the largest effect on individuals with the same skill level. i.e., ethnic networks of low skilled migrants mainly attract other low skilled migrants, while ethnic networks of high skilled migrants increase the
41 The odds are defined as the probability of choosing a region divided by the probability of not choosing this region.
attractiveness of a region for other highly skilled migrants. Although there are almost no negative effects of ethnic networks on the attractiveness of a region for individuals with higher or lower skill levels and a larger network of low skilled migrants also has a positive influence on the probability that medium and high skilled migrants choose this region, the network effect is, however, considerably smaller than for low skilled migrants. This implies that a given skill structure among established migrants from a specific source country will be "handed down" to future generations of migrants from the same country – thus in a sense "perpetuating" the skill structure in the absence of skill-based regulation and selection. This suggests that there is a lock-in effect with respect to the skill structure of migration from a particular country. Depending on the stock of migrants from a specific sending country it may thus take a long time before and substantial efforts before the skill structure of migrants from a specific country can be changed perceptibly, so that regulation must be sustained for a long period if the share of highly skilled migrants is to be increased.
The second finding is that almost all variables controlled by public policy which affect the attractiveness of a country or region for highly skilled migrants (e.g., the design of the tax or welfare systems, the ease of labor market access for foreigners, the quality of the educational system, etc.) also increase the odds that medium and low skilled migrants will choose this region. This limits the scope of economic policy to affect the skill composition of migrants. Furthermore, the effects on low and medium skilled migrants are often larger than on highly skilled migrants. Thus for instance an increase in the labor market access index for migrants raises the probability that a highly skilled individual moves to this region. It, however, increases the probability of a low skilled individual to migrate to this region even more. The same holds true for the tax progressivity measure as well as the quality of the schooling system (although here the effects are largest for medium skilled individuals). This implies that options to increase the skill level of migrants by creating incentives for highly skilled workers are limited, because almost all policy variables also affect the attractiveness of a country or region for low skilled workers. Thus, changes in these variables cannot affect the skill structure of migrants unless they are accompanied by regulations on low skilled migration. In sum our findings suggest that efforts to improve the skill structure of migrants by policy makers are likely to have only marginal effects once a particular network structure of migration exists.