What attracts human capital? Understanding the skill composition of interregional job matches in Germany

Abstract

By examining the destination choices of heterogeneous labour, this paper tries to explain the skill composition of interregional job matching flows in Germany. The paper thus provides insights on how policy can affect the spatial allocation of human capital to promote convergence between regions such as eastern and western Germany. Estimates from a nested logit model of destination choice suggest that the spatial pattern of job moves by high-skilled individuals are mainly driven by interregional income differentials, while interregional job matches by less-skilled individuals are mainly determined by interregional differentials in job opportunities. Interregional differentials in non-pecuniary assets only slightly contribute to the spatial sorting of skills and are partly driven by different spatial patterns of job-to-job matches and job matches after unemployment.