Migration, regional growth and convergence: a spatial econometric study on Romania

Migration has far-reaching implications for regional-economic growth and spatial disparities. This paper explores the role played by migration in spatial-economic development in Romania, a country that is facing large and persistent regional disparities. We develop a spatial-econometric model for studying the impact of migration movements in Romania (both domestic and international) on regional welfare patterns in this country. Employing a one-lag spatial dynamic panel model for the period 1995-2015 and accounting for the endogeneity of migration and human capital, our findings reveal that migration clearly adds to divergence. The composition effect outweighs the neoclassical quantitative effect and thus, migration undermines convergence. When migration inflows foster growth by skills-selectivity and strengthening agglomeration economies in richer destination regions, migration outflows appear to inhibit growth in source regions. Spatiality also matters, as regions turn out to grow faster when neighbouring other regions with a high development level, due to spillover effects. However, the clustering tendency of regions with a similar development level undermines convergence. In policy terms, our findings emphasize the need of economic incentives for raising human capital and investment stocks in regions that are lagging behind. This translates also into a strong argument in favour of EU Cohesion policy that can leverage the competitiveness-cohesion trade-off by increasing connectivity between regions and improving their business environment.