Discrete choice and random utility models of migration

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New Economic Geography

NEG, New Economic Geography, builds on a number of blocks; economies of scale, trade costs, and mobility of production factors. According to NEG, these blocks contribute to agglomeration. Agglomeration gives proximity for example to the consumers and firms. NEG also emphasizes imperfect markets and when imperfect markets are present the location decision of consumers and firms become more important (Brakman et al, 2001).
According to NEG, people will move due to real wage differentials between regions. In line with the spatial wage structure there is a negative relationship between wages and distances of a location from an economic center. Hence, people tend to move into economic centers, such as larger cities in order to raise their wages. This is also one of the reasons why agglomeration takes place and why rural-to-urban movements are present (Brakman et al, 2001). The importance of wages as pull factors is in line with the ideas of neoclassical migration theory
A central concept of NEG is scale economies. Scale economies can be defined as when more units of an output is produced at larger scale with less input especially concerning costs. When scale economies are present firms have incentives to reconsider its location. Economies of scales are divided into external and internal return to scale (Brakman et al, 2001). When considering external returns to scale the size of the economy as well as the size of the regions are crucial when it concerns aspects such as economic growth and welfare. Thereby NEG highlights the spillovers of external return to scale, such as R & D, knowledge, and expertise, that firms and individuals can obtain by being located in economic centers, s. Smaller regions are more dependent upon economic centers since these regions tend to become specialized in specific sectors or industries. Smaller regions can therefore not offer a large spectrum of products and services to their population and local businesses. The willingness to pay seems to be smaller in smaller regions than in larger
regions with economic centers (Johansson et al, 2007).
Internal return to scale refers to the definition of economies of scale presented above in terms of when a firm increases its output and reduces its input. The achievement mainly has an effect on the specific firm. Meanwhile external return to scale for instance occurs within an industry sector, outside the specific firm (Brakman et al, 2001).
Distance is crucial for people as a result of transaction costs. Shorter distance means reduced transaction costs, therefore it is beneficial. Close access to multiple services attracts people to move into these regions in order to reduce their payments for transaction cost (Johansson & Backman, 2007).
According to NEG, there are two main forces which contribute to economic development in regions. Firstly, consumers have a passion for varieties, for example in terms of household services; this aspect is taken into account in NEG. Regions that can offer a larger spectrum of varieties is more attractive to household and thereby prospective migrants. Secondly, businesses’ productivity grows as the number of varieties in different business services increases in a region (Johansson & Backman, 2007).
As mentioned in previous section, there is some equivalence between spatial interaction models and discrete choice and random utility models. This connection is also true for new economic geography. According to the new economic geography, consumers have a passion for varieties and in communities with high population the supply of different attributes are often more extensive. This approach is in line with the spatial interaction models and discrete choice and random utility models.

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The county of Östergötland

Östergötland is a county consisting of 13 municipalities located in the southeast part of Sweden. The county has a population of approximately 416,000 people. Östergötland has a central location in terms of geography, economic activity, and population. Within a distance of 200 kilometers of the central part of the county, 50% of Sweden’s population has their permanent residence. The two municipalities, Linköping and Norrköping, have the majority of the population in Östergötland and the main cities of these two municipalities have the highest population density of the county. Norrköping has throughout the history been an important city. During the 19th century Norrköping was one of the largest cities in Sweden and also one of the most important industry centers of the country. Meanwhile, Linköping has developed during the last century into an important and large city due to its strong position in for example economic activity, higher education and R&D. Linköping’s development has mainly two sources; SAAB’s aircraft manufacture and the University of Linköping. The university is today the sixth largest in Sweden and it has contributed to the development of the technical industry and the public sector.
Norrköping has received several head offices of governmental authorities and during the last decade the University of Linköping has established several sections of the university in Norrköping (Östsam Regional Development Council, 2007). The population of the county has increased with 8% between year 1968 and year 2004, which is the same rate as for whole Sweden. At a closer look on each municipality the populations of Linköping, Norrköping, and Söderköping have increased with 27%, 4%, and 39% respectively during the period 1974-2004. During the same period of time the rest of the municipalities in the county have experienced a negative population growth. Hence, in the central part of Östergötland, where Norrköping and Linköping are located, the
population density is high and is increasing compared to the rest of the county and to Sweden. The pattern of increasing population density of the area is similar to other large city areas, such as Stockholm, Gothenburg, and Malmö (Östsam Regional Development Council, 2007).

1 Introduction
1.1 Background
1.2 Research problem
1.3 Purpose
1.4 Outline .
2 Theoretical Framework.
2.1 Migration theories .
2.1.1 Neoclassical migration theory
2.1.2 Spatial interaction models of migration
2.1.3 Discrete choice and random utility models of migration
2.2 Economic development
2.2.1 New Economic Geography
3 The county of Östergötlan
4 Empirical study and Analysis 
4.1 Data collection
4.2 Estimation models
4.3 Result
4.4 Empirical Analysis
5 Conclusions 
References

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Internal Migration in Östergöt land

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