REMO—An Interregional Labor Market Model of Austria

Abstract

This paper presents an overview of a continuing research project which attempts to analyse regional labor market disparities in Austria by means of an econometric model. First, the structure of the labor supply and demand models is described and a set of behavioral hypotheses is stated. The supply side is modelled as a nonstationary Markov chain, where the transition probabilities are variables. A labor market segmentation is assumed to exist, where the barriers to professional mobility are the educational attainment levels. This approach leads to an integrated analysis of the regional education system. Other components of the supply side are the migration, commuting, and labor force participation submodels. The demand side, because of data restrictions, deals only with the secondary sector, regional investment, containing capital flows to and from other regions and labor demand are modelled as a simultaneous equation subsystem. A disequilibrium model was chosen for the labor market as a whole, that is, supply and demand are only equal by coincidence. The statistical basis for the econometric work are cross-sectional data available for a few points in time, based on the ninety-eight counties of Austria.