CHARACTERISTICS AND DETERMINANTS OF INTERNAL LABOR MOBILITY IN UKRAINE

Transcription

1 Public Disclosure Auhorized Public Disclosure Auhorized Public Disclosure Auhorized Public Disclosure Auhorized Olga Kupes* CHARACTERISTICS AND DETERMINANTS OF INTERNAL LABOR MOBILITY IN UKRAINE Background Paper for World Bank Repor No ECA In Search of Opporuniies: How a More Mobile Workforce Can Propel Ukraine s Prosperiy * Deparmen of Economics, Naional Universiy Kyiv-Mohyla Academy, Kiev. kupes@kse.org.ua The views expressed in his paper are hose of he auhor and do no necessarily represen he views of neiher he World Bank, is Board of Direcors, or he counries hey represen, nor he insiuion wih which he auhor is affiliaed. The auhor is graeful o Johannes Koel, Indhira Sanos, and Anna Olefir for commens of he previous drafs of he paper. May 2012

2 Conen 1. INTRODUCTION EVOLUTION OF REGIONAL DISPARITIES IN LABOR MARKET AND SOCIO- ECONOMIC CHARACTERISTICS DATA AND STYLIZED FACTS ABOUT INTERNAL MIGRATION IN UKRAINE DATA AND DEFINITIONS INTERNAL MIGRATION IN UKRAINE: DYNAMICS AND INTERNATIONAL COMPARISON INTERNAL MIGRATION BY AGE, SEX AND URBAN/ RURAL DIVIDE PATTERNS OF INTER-REGIONAL MIGRATION DETERMINANTS OF INTER-REGIONAL MIGRATION: EVIDENCE FROM THE ANALYSIS OF ADMINISTRATIVE DATA LITERATURE REVIEW Theoreical consideraions Empirical sudies in ransiion counries Empirical sudies in Ukraine DETERMINANTS OF INTER-REGIONAL MIGRATION: ANALYSIS OF GROSS FLOWS IN DETERMINANTS OF INTER-REGIONAL MIGRATION: ANALYSIS OF BILATERAL FLOWS IN DETERMINANTS OF INDIVIDUAL MIGRATION DECISIONS IN UKRAINE: EMPIRICAL EVIDENCE FROM EXISTING STUDIES COMMUTING IN UKRAINE: PATTERNS AND DETERMINANTS DATA AND DEFINITIONS MAGNITUDE OF COMMUTING AND ITS MAIN CHARACTERISTICS DETERMINANTS OF COMMUTING SUMMARY AND CONCLUSIONS REFERENCES ANNEX

3 1. Inroducion Over he pas 20 years Ukraine experienced fundamenal srucural changes due o ransiion o a marke economy and inegraion wih he world. Transiion reforms accompanied by he collapse of radiional rade and producion links wih he oher republics of he former USSR and Comecon counries enailed asymmeric effecs on regions, reflecing an uneven disribuion of winners and losers from ransiion. Geographical mobiliy of labor is one of he major mechanisms (alongside wih capial mobiliy, wage and price flexibiliy, and insiuional mechanisms for redisribuing income across regions) in faciliaing regional adjusmen o idiosyncraic shocks. 1 The abiliy of workers o move freely from one geographical locaion o anoher inside he borders of heir counry, in pursuing he same occupaion or changing occupaions, is of paricular imporance for efficien maching of labor demand and supply and reducing srucural unemploymen. Inernal labor mobiliy may also conribue o economic growh and developmen of such secors as agriculure, manufacuring, consrucion, coasal economies and services. For example, Sharpe e al. (2007) found ha inerprovincial migraion in Canada played an increasing role in he local economy over he las years. Due o high migraion from low-produciviy easern provinces o high-produciviy wesern provinces Canada s economy received a huge boos in 2006: ne oupu gains arising from inerprovincial migraion are esimaed o be per cen of GDP in consan 1997 prices and per cen of GDP in curren prices. The sudy provided evidence ha inerprovincial migraion was responsible for 1.56 per cen of rend labor produciviy growh in Canada over he period and 6.23 per cen of acual labor produciviy growh in Taking ino accoun ha inernal labor mobiliy is ofen far more imporan boh in erms of he numbers of people involved and he resuling flow of remiances han inernaional migraion, especially in he counries wih marked regional inequaliies, mobiliy of workers across he counry is criical for overcoming povery, smoohing household consumpion in he wake of unexpeced shocks and faciliaing regional human developmen (IOM, 2008; World Bank, 2008). However, as i has been well documened in he lieraure on povery (Brück T. e al. 2010; UNDP, 2008; WB, 2005; MDGs, 2003), Ukraine has no aken full advanage of labor mobiliy across he counry for bringing down regional imbalances and exising spaial povery raps, i.e. geographic pockes of povery, disadvanage and marginalisaion. Visible and concealed barriers o migraion of workers and heir families ogeher wih a lack of ineres and poliical commimen o address exising migraion-relaed challenges from he governmen s side are among he major facors accouning for low inernal migraion and is low effeciveness in adjusing regional shocks. Furhermore, here is a prevailing negaive public percepion of migraion in Ukraine, reflecing he concerns of policymakers ha sizeable movemens of people wihin he counry (as well as ouside i) are largely irreversible, ha hey could damage he endowmen of human capial and herefore compeiiveness and subsequen developmen poenial of he sending regions, 2 while exering a consisen srain on local governmens, public services and infrasrucure (including ranspor, housing, mainenance of law and order, educaion, healh and various welfare provisions) in he desinaion areas. This paper seeks o fill gap in he lieraure on paerns of inernal labor mobiliy in Ukraine, is main characerisics and poenial for reducing persisen regional labor marke dispariies and imbalances in economic and human developmen. The nex chapers of he paper are organized as follows: Chaper 2 evaluaes he magniude of dispariies in regional labor marke and socio-economic indicaors over ime, wih a special focus on is poenial impac on decision of individuals o migrae o anoher selemen; 1 See hp:// for a summary of adjusmen mechanisms o asymmeric shocks. The main adjusmen mechanisms which could poenially reduce regional dispariies in unemploymen, as idenified by he heoreical and empirical lieraure, are also summarized in Paci e al. (2007). 2 See for example, aricle 2 in he Resoluion of he Naional Securiy and Defense Council of Ukraine On direcions of he naional migraion policy in Ukraine and urgen measures o increase is effeciveness, approved by he Decree of he Presiden of Ukraine N 657/2007 in July

4 Chaper 3 provides an overview of he available daa sources on inernal labor mobiliy in Ukraine, quanifies inernal migraion based on aggregae adminisraive daa, discusses is rends over ime and compares i levels o hose found in developed and ransiion economies. I also idenifies he main characerisics of inernal migrans based on aggregae daa; Chaper 4 provides mulivariae saisical analysis of he deerminans of iner-regional migraion in based on adminisraive region-level daa; Chaper 5 summarizes he findings of empirical sudies on deerminans of he migraion decision of Ukrainians; Chaper 6 examines shor-erm labor migraion including everyday commuing in and measures is covariaes using individual-level LFS daa; Chaper 7 summarizes he main findings and concludes. 2. Evoluion of regional dispariies in labor marke and socio-economic characerisics There are significan iner-regional differences in Ukraine, as measured by he coefficien of variaion (which normalizes he sandard deviaion by dividing hrough by he naional average) and he raio of he maximum o he minimum values (Table 2.1). 3 As one could expec, regional dispariies are more pronounced in a larger sample of regions wih Kyiv and Sevasopol ciies han in a smaller one, demonsraing ha he capial ciy sands ou agains he oher regions of Ukraine in economic and human developmen (see bold enries in Max/Min columns). Table 2.1 also reveals ha divergence in economic developmen measured by regional gross regional produc (GRP) per capia and is annual growh rae in real erms as well as in some imporan social indicaors (crime rae and air polluion measure) is generally more pronounced han in labor marke characerisics (unemploymen as well as employmen and labor force paricipaion raes no presened here) and wage indicaors. GRP per capia levels ranged from 53.6 percen o abou 345 percen (188.4 percen in he smaller sample of regions) of he naional average in 2010, wih he lowes level in Chernivsi oblas and he highes one in Kyiv Ciy (Dniproperovsk oblas in he smaller sample). The raio beween he highes and he lowes unemploymen rae measured according o he ILO mehodology did no exceed a facor of wo in Divergence of regional wages was somewha more pronounced in erms of he raio of he maximum o he minimum value, reaching 2.1 in a large sample and 1.6 in a smaller one. On he oher hand, he coefficien of variaion which is a more useful saisic for measuring he degree of variaion in daa, shows larger regional dispersion of he unemploymen rae han of nominal wages. Real wage growh raes indicae even more subsanial differeniaion of regions boh in erms of he raio of wo exreme values and he coefficien of variaion. Compared o he EU member saes, regional dispariies in Ukraine have been, on average, smaller han in many CEE counries and are raher comparable o hose observed in more advanced economies (see, e.g., EC (2007), Table 2 and Figure 2; and Paci e al. (2007), Figure 2.3). Anoher ineresing finding from he daa provided in Table 2.1 is ha regional differences in housing and renal prices in he main regional ciies (oblas ceners, capial ciy of Crimean AR, Kyiv Ciy, and Sevasopol Ciy) which are presumably he mos aracive places for poenial migrans wihin each region are much larger han differences in income variables, paricularly in wages. This suggess ha economic reurns from moving from one place o anoher wihin Ukraine are likely o be on average smaller han he coss of relocaing and living in he new place, and only beer off persons wih greaer innae abiliies and moivaion for personal achievemen, less liquidiy consrains and beer access o morgages can afford o migrae o he places wih beer employmen opporuniies and higher incomes (migraion self-selecion). Under such condiions, commuing and emporary labor migraion seem o be more viable subsiues for permanen (residenial) migraion, paricularly for lower skilled workers. 3 Regional saisics in Ukraine including migraion saisics is provided for 27 adminisraive unis: 24 oblass, one Auonomous Republic (Crimean AR), and wo ciies wih a special saus Kyiv and Sevasopol which adminisraively are equivalen o oblass. Table A.1 in Annex provides main characerisics of hese regions grouped ino five geographic macroregions, used laer in our sudy. 4

5 Table 2.1. Regional dispariies in seleced labor marke and socio-economic characerisics* Raio of Coefficien of variaion (%) Characerisic Yea r Mean Min Max max o min 27 regions 25 regions Unemploymen rae (%) Average monhly gross wage (UAH) Real wage growh rae (%, yoy) Gross regional produc per capia (UAH) Growh rae of gross regional produc per capia (%, yoy) Disposable per capia income (UAH) Monhly household money expendiures (UAH) Toal local expendiures per capia (UAH) Social local expendiures per capia (UAH) ** Life expecancy a birh (years) Crime rae (number of regisered crimes per 100,000 populaion) Emissions of air polluans from saionary and mobile sources of polluion (kg per person) Share of populaion (6 years and over) wih complee higher educaion (%, based on HBS) Share of he labor force (25-70 years) wih complee higher educaion (%, based on LFS) Share of households living in rened housing (%, based on HBS) Housing price a secondary marke in he main regional ciy (UAH per sq.m) Monhly ren paymen for one bedroom aparmen in he main regional ciy (UAH) Source: Expendiures of local governmens per capia auhor s calculaions based on he daa of he Minisry of Finance on he srucure of local expendiures published in he yearbook Budge of Ukraine in 2010, share of he labor force wih complee higher educaion auhor s calculaions based on he LFS daa, housing and renal prices auhor s calculaions based on he daa base of he World Bank, he res Sae Saisics Service of Ukraine (various saisical yearbooks and web-page). Noe: * The sample of 25 regions does no include wo ciies wih a special saus (Kyiv and Sevasopol). The mean values are calculaed as non-weighed means of regional-level values and herefore do no mach wih he naional averages provided in macro-level saisics. Bold enries in Max/Min columns refer o Kyiv Ciy. ** Social expendiures of local governmens include expendiures on educaion, healh care and social proecion. Figure 2.1 below depics he evoluion of regional dispariies in regional unemploymen raes, average gross wages, gross regional produc per capia 4 and local per capia social expendiures, measured by he coefficien of variaion. Three ou of he four characerisics displayed in his figure, namely unemploymen raes, average wages, and local social expendiures per capia, show signs of gradual convergence beween regions, paricularly in a smaller sample wihou Kyiv and Sevasopol ciies. 4 Saisics on gross regional produc is available since 2004 only. 5

6 On he oher hand, regional dispariies in per capia gross regional produc are much higher and increasing over ime. According o he new economic geography models, regional income divergence can be explained no only by lasing differences beween regions in heir facor endowmen, facor produciviy, echnologies, regional incenives and subsidies, and insiuional capabiliy, increasing reurns o scale and ranspor coss, bu also by he imporance of cenripeal (agglomeraive) forces such as localized supply and demand neworks, inernal and exernal economies of scale, human capial spillovers and specialised infrasrucure ha lead o indusrial clusering and agglomeraion (see, e.g. Fujia e al. (1999), cied in EC (2007) and Paci e al. (2007)). In his environmen, high labor and capial mobiliy from poorer o richer regions are likely o reinforce raher han reduce exising paerns of regional differeniaion in erms economic developmen. Figure 2.1. Coefficien of variaion in regional unemploymen raes, average gross wages, gross regional produc per capia and local social expendiures per capia, regions regions Unemploymen rae GRP per capia Average gross wage Social expendiures per capia Noe: See sources and a noe o Table 2.1. Despie decreasing regional labor marke dispariies over ime, he rankings of regions in erms of economic and income indicaors remained very sable hroughou he las decade. Pearson s correlaion coefficiens wih previous year s values (firs-order auocorrelaion) as well as correlaion coefficiens beween values in 2010 and he earlies year in he sample approach 1 for boh regional wages and GRP. A srong link beween hese wo measures (correlaion coefficien was 0.94 in 2010) suggess ha higher wages are paid in richer regions. Alhough he recen economic crisis has exposed Ukraine o regional asymmeric shocks by affecing previously beer-off regions more severely han ohers (Kupes, 2010) and herefore i migh have resuled in he re-disribuion of regions by heir economic performance, our analysis reveals ha regions showing beer performance in 2001 end o perform relaively beer in , probably due o he safey margin accumulaed in beer imes. However, his observaion applies o he regional disribuion of average wages and GRP in curren UAH, i.e. nominal values, and i does no fi o he rankings of regions by he corresponding measures in real erms (i.e. annual real wage and GRP growh raes) which change from year o year inconsisenly. Regional unemploymen raes were also highly correlaed wih previous year s values, bu heir correlaion wih values of 2001 is quie modes (0.46). This suggess ha here were some imporan changes in he regional disribuion of unemploymen raes ha migh signal abou region-specific shocks and differen labor marke adjusmen of regions o hem. Like in mos counries, correlaion beween regional unemploymen raes and average wages is found o be negaive hroughou he observed period indicaing ha workers employed in high unemploymen areas earn on average less han idenical workers living in he regions wih low 6

7 unemploymen. This provides enaive evidence for exisence of he wage curve (see Blanchflower and Oswald, 1994) in Ukraine. The coefficien of variaion beween regional unemploymen raes and average wages decreased from in 2004 o in 2010 bu hen increased o in Due o regional economic specializaion and geographic concenraion of manufacuring indusries in Ukraine, is 27 regions may be well grouped ino five geographic macroregions 5 consising of neighboring erriories which also share similar srenghs and weaknesses in erms of heir economic and human developmen (see Table A.2 in Annex): Kyiv Ciy is characerized by excepionally high levels of economic and human developmen, even hough i performs he wors in erms of social and environmenal siuaion. High living sandards and favorable employmen opporuniies, concenraion of human capial, invesmen, producion and overall prosperiy in he capial ciy arac inernal migrans from he res of he counry despie very high housing and renal prices. Neverheless, 62.3 percen of gross inerchange in 2010 occurred beween Kyiv Ciy and non-disan oblass locaed in Norh and Cener (Table 2.2); Table 2.2. Gross inerchange and ne migraion beween macroregions, 2010 Desinaion region (j) Kyiv Ciy Cener and Norh Eas Souh Wes Origin region (i) Gross Ne Gross Ne Gross Ne Gross Ne Gross Ne Kyiv Ciy Cener and Norh Eas Souh Wes Toal Source: Auhor s calculaions based on Sae Saisics Service daa on iner-regional migraion flows in Noe: Gross inerchange or urnover beween wo areas i and j is defined as he sum of a pair of sreams M ij +M ji (UN, 1970). Ne migraion beween wo areas i and j is defined as he difference beween in-migraion o area j (M ij ) and ou-migraion from i (M ji ). Cener and Norh (consising of Vinnysia, Zhyomyr, Kyiv, Kirovohrad, Polava, Sumy, Cherkasy and Chernihiv oblass) wih predominanly Ukrainian-speaking populaion and high share of agriculure in oal employmen. Despie proximiy o he capial ciy and grea poenial in economic developmen, his macroregion lags behind in many aspecs of labor marke and human developmen. On he oher hand, proximiy o Kyiv Ciy encourages many people o move o he capial region eiher wih he officially regisered change of residence or wihou i. This conribues o consan populaion losses in he macroregion even hough hey are slighly offse by ne in-migraion of populaion from Easern and Wesern regions; indusrially developed and urbanized Eas wih predominanly Russian-speaking populaion (which consiss of Dniproperovsk, Donesk, Zaporizhia, Luhansk and Kharkiv oblass) is he second riches macroregion of Ukraine afer Kyiv Ciy wih raher favorable labor marke performance bu i lags behind he oher macroregions in erms of demographic developmen, social siuaion, environmen qualiy and per capia expendiures from local budges. As a resul, despie relaively high wages and low unemploymen raes, Eas faced ne populaion losses from migraion inerchange wih all oher macroregions excep for less developed Wes in 2010; Souh (which includes Crimean AR and Sevasopol, Mykolayiv, Odesa and Kherson oblass) wih predominanly Russian-speaking populaion and raher diversified economy. The overall human and labor marke developmen in his macroregion is more favorable han in he res of he counry (if leaving aside Kyiv Ciy) bu i is highly volaile because of he significan dependence on he 5 I is necessary o noe ha here is no officially adoped subdivision of Ukraine ino macroregions, and herefore he number of regions, is names and conen provided here may differ from he ones offered in oher regional sudies. According o an earlier auhor s analysis of regional saisics on human and economic developmen (Kupes, 2009), grouping of Ukrainian regions based on a cluser analysis seems o reflec regional dispariies beer (see Table A.2 in Annex). 7

8 season, weaher condiions, and poliical siuaion (paricularly in Crimean AR and Sevasopol). Favorable labor marke performance accompanied by climaological and environmenal ameniies arac inernal migrans no only from he regions belonging o he same macroregion bu also and more imporanly from oher macroregions (abou 65.3 percen of gross inerchange in 2010); agrarian and predominanly rural Wes wih Ukrainian-speaking populaion (which includes Volyn, Zakarpaia, Ivano-Frankivsk, Lviv, Rivne, Ternopil, Khmelnyskyi and Chernivsi oblass) exhibis he wors performance by economic, labor marke and human capial characerisics bu i performs fairly well in erms of demographic, social, and environmenal siuaion. Weak labor marke developmen, poor living condiions and maerial well-being of he local populaion encourage considerable ou-migraion of populaion, boh wihin he boundaries of Ukraine and ouside hem. However, he bulk of iner-regional migraion flows originaing in he Wesern macroregion (abou 56 percen of gross inerchange in 2010) occurs beween oblass of he same macroregion. These findings sugges ha here are large and persisen regional dispariies in unemploymen, income and human developmen characerisics in Ukraine. Regions end o be clusered ino disinc groups of developmen and prosperiy ha impedes furher convergence beween he bes performing and he mos backward regions. Wheher inernal migraion of populaion is insrumenal in absorpion of asymmeric shocks and faciliaion of regional convergence in Ukraine is a subjec of our furher research. Afer a closer look a he magniude and characerisics of inernal migraion in Ukraine in he nex chaper, we will examine he responsiveness of iner-regional migraion o regional differences in wages, unemploymen raes and oher imporan characerisics of regional economic and human developmen. 3. Daa and sylized facs abou inernal migraion in Ukraine 3.1. Daa and definiions According o he Unied Naions manual, Mehods of Measuring Inernal Migraion (1970), migraion is defined as a move from one migraion-defining area o anoher (or a move of some specified minimum disance) ha was made during a given migraion inerval and ha involved a change of residence. A migran is a person who has changed his usual place of residence from one migraiondefining area o anoher (or who moved some specified minimum disance) a leas once during he migraion inerval An in-migran is a person who eners a migraion-defining area by crossing is boundary from some poin ouside he area, bu wihin he same counry. He is o be disinguished from an "immigran" who is an inernaional migran enering he area from a place ouside he counry An ou-migran is a person who depars from a migraion-defining area by crossing is boundary o a poin ouside i, bu wihin he same counry. He is o be disinguished from an "emigran" who is an inernaional migran, deparing o anoher counry by crossing an inernaional boundary. The primary source of daa on migraion flows in Ukraine is adminisraive daa on in-migraion (inflows), ou-migraion (ouflows) and ne migraion (inflows less ouflows) based on regisraion of populaion by he place of permanen residence (previously known as propiska). According o he Law On Freedom of Movemen and Free Choice of he Place of Residence in Ukraine (effecive since January 2004), a ciizen of Ukraine, as well as a foreigner or a saeless person who says in Ukraine legally, shall regiser his/her place of residence during en days afer arrival a he new place of residence which is defined by he Law as an adminisraive-erriorial uni where a person lives for a leas 6 monhs during a year. To be regisered, a person shall submi a wrien applicaion, inernal passpor, he receip of sae duy paymen or he documen abou exempion from i, and wo copies of he filled form of deregisraion from he previous place of residence. According o his Law, i shall be prohibied o require oher documens in order o regiser he place of residence. However, according o he Civil Code of Ukraine, he place of residence is a place where a person permanenly or predominanly lives as an owner, under he erms of he enancy conrac or under oher sauory erms. Therefore, o be regisered, a person should provide grounds for regisraion in his paricular place (which should be recorded in he regisraion card), i.e. a proof of residence such as an auhorizaion o occupy an aparmen, a propery cerificae, a enancy conrac, or an alernaive 8

9 documen or he/she needs he agreemen of he owner in case of privae ownership or of all aduls already regisered in he residence in case of sae/communal ownership. Due o exising collisions in legal norms and few incenives o comply sricly wih he rules of regisraion, no all individuals changing heir place of residence are properly couned in official migraion saisics. Furhermore, he year of regisraion of he new place of residence may significanly differ from he year of movemen o he new erriory. Employmen-relaed migraion which is usually no accompanied by he corresponding changes in he place of residence hrough he regisraion sysem also remains undocumened. On he oher hand, populaion migraion saisics repors movemens of populaion which are no necessarily induced by he need of searching for an accepable employmen opporuniy bu raher relaed o oher imporan life-cycle evens such as sar and compleion of pos-secondary sudies, marriage and divorce, birh, aging, and leaving home of children, reiremen, improvemen of housing condiions, and he like. 6 In many cases migraion can be also involunary and of he conraced ype, such as job ransfers in he public secor (he relocaion of miliary personnel, civil servans, judges, prosecuors, managemen personnel of public enerprises) as well as in he privae secor when he individual migraes wih a job in hand (Greenwood, 1997). Therefore, official migraion saisics should be inerpreed wih cauion as i underesimaes he rue magniude of workers flows bu includes many ypes of migraion ha are no direcly linked o radiional facors of labor migraion such as income and employmen differenials. This, however, is a ypical problem of mos migraion sudies in CEE counries, as populaion regisers are he only reliable source of daa on migraion in hese counries (Fidrmuc, 2004; Hazans, 2003a; Andrienko and Guriev, 2004; Bloze, 2009; Bunea, 2012). Available migraion saisics in Ukraine records all regisered residenial moves of populaion wihin he counry during a given period of ime (usually monh or year) of he following ypes: (i) wihin he same adminisraive uni (inra-regional migraion); (ii) beween 27 adminisraive unis (iner-regional migraion); (iii) oal inernal migraion (he sum of he former wo). 7 We will use adminisraive daa on annual inernal migraion flows for he period for which survey-based indicaors (e.g. unemploymen rae or household income) have been calculaed wih aking ino accoun he srucure of populaion according o he las populaion Census conduced in December Taking ino accoun he average size of Ukrainian regions ( housand people in 2010), adminisraive division of Ukraine ino 27 unis as basic regions for he applicaion of regional policies is consisen wih he NUTS sysem 8 and corresponds o is second level (NUTS-2). This allows us o compare regional indicaors in Ukraine o hose in he old and new EU member saes. Amongs he mos frequenly used indicaors in he analysis of inernal populaion migraion based on adminisraive records are he following: In migraion _ rae i, Ou migraion _ rae Ne _ migraion _ rae i, i, Gross _ migraion _ rae Inflowsi, = Populaion i, i, Ouflows = Populaion i, *100% i, *100% Inflowsi, Ouflows = Populaion i, i, i, Inflowsi, + Ouflows = Populaion *100% i, *100% (1) (4) 6 For example, according o he ULMS (2003, 2004 and 2007) he mos frequenly menioned reasons for he change of residence were marriage or moving in wih parner, moving in/ou from parens or relaives, desire o change housing condiions, and saring sudies. 7 Alhough populaion regisers coun migraions (evens) raher han migrans (ransiions), we use hese erms inerchangeably assuming ha he share of muliple and reurn migraion is negligible. See UN (1970) and Bell e al. (2002) for a summary of issues in regard o he definiion, measuremen and collecion of daa on migraion. 8 NUTS (Nomenclaure of Terriorial Unis for Saisics) is a sandard developed, regulaed by he EU and implemened in he EU member saes. 9

10 where Inflows i, and Ouflows i, sand for in-migraion and ou-migraion o/from he region i during ime period (year in our sudy) respecively, and Populaion i, is he average annual de faco populaion of he respecive region i in ime period. 9 Migraion raes as well as oher demographic indicaors in Ukrainian saisics are measured in per mille (i.e. per 1,000 populaion in a given year) bu we will use he measures of a percenage ype for he sake of simpliciy. Eq. (1) and eq. (2) define gross in- and ou-migraion raes which may be seen as general measures of region s aracion or disracion respecively. Eq. (3) defines he ne migraion rae which may be used o idenify he winners and losers in he conex of iner-regional migraion. Finally, he gross migraion rae in eq. (4) measures he oal migraion inensiy in he respecive regions and helps idenifying more and less dynamic regions in erms of migraion. Following Huber (2005), he counry-level gross migraion rae (or urnover rae) is he share of he populaion which has changed is place of residence inside he borders of a counry wihin a year and can be defined as half of he sum of oal inernal ouflows and inflows across all regions (division by wo is necessary o avoid double couning): ( Inflows, + Ouflows, ) 1 i i i Gross _ migraion _ rae = *100% (5) 2 Populaion The ne migraion rae a he counry level (or he rae of redisribuion due o migraion according o UN(1970)) is he sum of ne changes of like sign, which is he same as aking one half of he sum of all changes wihou regard o sign 10 : Inflowsi, Ouflowsi, Inflowsi, Ouflowsi, 1 = + i Ne migraion rae *100% = *100% (6) Populaion 2 Populaion i i, Finally, an index which relaes ne migraion o urnover and is called an effeciveness index can be esimaed as follows: Inflowsi, Ouflowsi, Ne _ migraion _ rae i Effeciven ess _ index = *100% = *100% (7) Gross _ migraion _ rae ( Inflows Ouflows ) If migraion is compleely effecive (ha is, migraion is all in one direcion), an effeciveness index akes value of 100%. A difference beween 100% and he index shows a par of migraion accouned for by churning flows when people move in and ou of he same region. According o he lieraure reviewed by Huber (2005), hese churning flows can be explained by: (i) heerogeneiy of individual ases and characerisics of regional demand for labor; (ii) differen life-cycle posiions of individuals (e.g. sudens migraing beween heir homes and place of educaion); (iii) endogenous wealh effecs arising among ex-ane homogenous individuals; (iv) and he processes of sochasic maching and dynamic adjusmen. The oher wo daa sources which conain migraion-relaed informaion is he individual-level daa from he Ukrainian Labor Force Survey (LFS) and he Ukrainian Longiudinal Monioring Survey (ULMS). The former is used in our sudy for he analysis of he commuing behavior of he employed in The laer is a rich panel daa se which could enable a rigorous dynamic analysis of he migraion behavior of individuals, heir main moives and characerisics bu because of is small sample of recen migrans which moved o anoher place of residence during he observed period i i i, i i, i, i, 9 See Chaper VI in UN (1970) for an overview of migraion raes, raios and indices and he problems associaed wih heir consrucion. Our formulas (1)-(3) agree wih formulas (31)-(33) in UN (1970). 10 In order o compare regional-level gross and ne migraions raes (esimaed according o eq. 3 and 4) o hose a he naional level (eq. 5 and 6), eiher regional-level indicaors need o be divided by wo or couny-level indicaors need o be muliplied by wo. 10

11 beween he firs and las waves of he survey in 2003 and 2007 respecively 11 we will no perform our own analysis bu raher use exising empirical sudies based on he ULMS. Finally, an imporan and probably he mos reliable source of daa on populaion migraion in mos counries is he Populaion Census (UN, 1970; Bell, 2003). We will use he daa from he las Census in Ukraine carried ou in December 2001 o quanify he sock of inernal migrans of all ages and of working age used as a proxy for he producive par of he whole migran populaion. On he basis of he answer abou he place of birh (he birh-place approach), (lifeime) migrans are defined as persons who were enumeraed in a place differen from he place where hey were born (UN, 1970). Recen migrans are defined according o he duraion-of-residence approach as lifeime migrans who moved o heir desinaions during 5 years and less prior o he census (i.e. during ). A serious drawback of he Census daa in Ukraine however is ha hey do no provide imporan informaion on migraion paerns of populaion in he new Millennium Inernal migraion in Ukraine: dynamics and inernaional comparison In 2011, 637,713 persons were inernal migrans in Ukraine based on heir official place of residence, which consiue abou 1.4 percen of he oal counry populaion. This figure indicaes a decrease of abou 2.3 percen from he previous year which recorded 652,639 inernal migrans. Despie some increase in 2010, gross migraion rae remains below is pre-crisis levels in (Figure 3.1). This rend migh be aribued o liquidiy consrains faced by poenial migrans and housing marke imperfecions accenuaed by he economic and financial crisis in Besides, decreasing number of youh and declining real household incomes ha could be used for invesmen in children s educaion conribue o a decrease in he number of high school graduaes moving o anoher selemen o pursue sudies in higher educaional insiuions. Finally, i is also possible ha populaion reac on falling iner-regional economic differences bu increasing migraion coss by changing heir permanen places of residence less frequenly. Figure 3.1. Inernal migraion in Ukraine, Number of iner-regional migrans (housand persons) Number of inra-regional migrans (housand persons) Gross migraion rae, all flows (%) - rhs Gross migraion rae, iner-regional flows (%) - rhs Ne migraion rae (%) - rhs Source: Sae Saisics Service of Ukraine (numbers) and auhor s calculaions (raes according o eq. (5) and (6)). As Figure 3.1 shows, of he oal migrans wihin Ukraine, abou percen are migrans wihin he same adminisraive region (i.e. inra-regional migrans) whereas he res percen move from one 11 For example, in he las wave conduced in 2007 which is based on he sample of he firs wave, 494 individuals (7.29% of all respondens) repored abou he change in residence since he previous inerview in April-June However, he bulk of hese changes are movemens wihin he same selemen (mainly because of marriage, divorce, ec.). If we look a he number of persons who changed residence since 2004 and whose selemen was differen from heir place of birh, we have only 218 cases. The reason for his small number of cases is ha i is difficul or impossible o race sampled households ha moved o anoher selemen. Besides, hese households did no wan o pu up wih he effor of being inerviewed repeaedly, and so he panel ariion was very high

12 region o anoher (i.e. iner-regional migrans). If we ake ino accoun only iner-regional flows, gross migraion rae decreases o less han 0.6 percen of populaion in In , afer reaching is peak value of percen in 2004 ne migraion rae decreased o percen of he populaion in As a resul, an effeciveness index of iner-regional migraion declined from 13.8 percen in 2004 o 8.2 percen in This implies ha he imporance of churning flows which usually conribue lile o he narrowing of regional dispariies has considerably increased since Comparison of iner-regional migraion raes in Ukraine and seleced EU counries provided in Table 3.1 reveals ha despie having a larger number of regions Ukraine has lower iner-regional migraion han in mos Wesern European counries which are characerized by less flexible labor markes and populaion han Ausralia, Canada, New Zealand and he US. 12 Meanwhile, Ukrainian migraion raes are largely comparable o hose found in more advanced ransiion economies which joined he EU, for example, he Czech Republic and Esonia, and are somewha higher han in Poland and Slovakia. The sylized fac of low and falling migraion raes in he face of large regional dispariies in erms of regional income and unemploymen raes in he new EU member saes has been repeaedly documened in he lieraure (see, among many ohers, Huber, 2005; Fidrmuc, 2004; EC, 2007). The same rend seems o hold rue in Ukraine. Table 3.1. Indicaors of iner-regional migraion in Ukraine and seleced EU counries Counry Regional disaggregaion Number of regions Average populaion (housand) Gross migraion rae (%) Ne migraion rae (%) Effeciveness index of iner-regional migraion (%) Ukraine (2002) eq. o NUTS II Ukraine (2011) eq. o NUTS II Ausria (1999) NUTS II Belgium (1999) NUTS II Denmark (1999) NUTS III Spain (1999) NUTS II Neherlands (1999) NUTS II Sweden (1999) NUTS II Czech Republic (1999) NUTS II Esonia(1999) NUTS III Hungary (1999) NUTS II Poland (1999) NUTS II Romania (1999) NUTS II Slovenia (1999) NUTS III Slovakia (2000) NUTS II Source: Ukraine auhor s calculaions based on adminisraive daa on iner-regional flows, EU counries Huber (2005), Tables 1 and 2. According o he las populaion Census in 2001, he oal sock of inernal lifeime migrans defined on he basis of he birh-place approach numbered 12,783,899 people, or 26.5 percen of he oal de faco populaion. The number of inernal migrans of working age (15 o 64 years inclusive in he UN definiion) who were more likely o move for employmen-relaed reasons han heir older counerpars was esimaed abou 10,256,286 people, or 30.8 percen of working-age populaion. As of December 2001, less han 3 percen (7 percen) of working-age populaion, including hose born abroad, lived a heir curren place of residence for up o one (five) year(s). A he same ime, abou 69.4 percen of individuals aged years lived a heir curren place of residence for 12 years and more, i.e. hey changed heir place of residence before Ukraine gained is independence in This finding suppors he view ha migraion inensiy of working age individuals has significanly decreased since he collapse of he Sovie Union. 12 The main difficulies of inernaional comparisons of inernal migraion raes are discussed in Greenwood (1997) and Bell e al. (2002). 12

13 Table 3.2. Inernal migraion of working age populaion in Ukraine and seleced ransiion counries Counry and year of survey (ranked by share of migrans) Inernal migrans * (% of working age Recen migrans** (<=5 years, % of oal working Recen migrans** (% of inernal migrans) populaion) age populaion) Bosnia & Herzegovina Azerbaijan Ukraine 2001*** Armenia Albania Kyrgyz Republic Romania Croaia Bulgaria Tajikisan Kazakhsan Source: Ukraine auhor s calculaions based on Census daa, oher counries WB (2008, Table 5.3). Noe: *An inernal migran is defined as an individual who is no living in he same disric in which s/he was born. This definiion does no coun reurnees as migrans, ha is, persons who have moved away from heir place of birh in he pas, bu have reurned by he ime of he survey. ** A recen migran is a person who migraed a mos five years prior o he census. *** Convenional age brackes (15-64 years) are used for he working age populaion raher han hose according o he Ukrainian legislaion (15-54 years for women and for men). Esimaes for recen inernal migrans in Ukraine are very rough as hey include foreign-born persons because of daa limiaions, namely saisics on he composiion of migrans by duraion of living in he curren place of residence wihou disinguishing beween persons born in Ukraine and abroad. Taking ino accoun large inflows of people from he former Sovie Union republics in he 1990-s and before, hese numbers are likely o be significanly overesimaed. For comparison, he share of recen migrans in he oal sock of working age migrans including foreign-born persons was 16.8 per cen. If we believe daa offered in he World Developmen Repor 2009 and our esimaions for Ukraine (Table 3.2), Ukraine compares favorably wih oher ransiion economies in erms of he oal share of inernal migrans in working age populaion bu i lags behind in proporion of recen migrans compared o some counries experiencing ehnic and war conflics (such as Bosnia and Herzegovina, Armenia, Azerbaijan, he Kyrgyz Republic) ha forced many people o move o oher pars of heir counries. Bu his cross-counry comparison is provisional and is subjec o laer aleraion as i does no conrol for he average size and he number of geographic unis which are likely o impac he number of inernal migrans recorded in each counry Inernal migraion by age, sex and urban/ rural divide 13 Age. Figures 3.2 and 3.3 depicing gross inernal migraion raes by age groups reveal ha he peak propensiy occurs in he year-old age group. In 2010, he gross migraion rae peaked a 6 percen in he year-old age group, fell o 4.1 percen for he year-old group and hen declined seadily, wih a sligh upurn afer 70 years. Migraion propensiy is also relaively high for children under five years old ha reflecs heir migraion wih parens, who are ypically in he age groups wih high mobiliy. These paerns are long-sanding in Ukraine, and in general are similar o hose found in many oher counries. The major difference beween migraion age profiles in Ukraine and developed economies (see, e.g. Ezo (2008) for Ialy, Bell e al. (2002) for Grea Briain and Ausralia, Kupiszewski e al. (2000) for Swizerland, Greenwood (1997) for he US) however is ha annual inernal migraion propensiy peaks a younger age in Ukraine han in he developed world. 14 Besides, unlike he developed counries, here are no signs of consumpion-led reiremen migraion in Ukraine. Figure 3.2. Gross inernal migraion raes by age and sex (%), 2002 vs Due o daa limiaions his subsecion refers o oal inernal migraion, i.e. boh inra- and iner-regional migraion. 14 Available evidence on inernal migraion in Russia (hp://demoscope.ru/weekly/2005/0185/anali01.php) suggess ha migraion age profiles, paricularly for inra-regional migraion, are largely comparable o hose observed in Ukraine bu gender differences in Russia appear o be much more pronounced han in Ukraine. 13

14 Male Female Male Female Source: Sae Saisics Service of Ukraine, auhor s calculaions. Noe: The gross migraion raes show he number of all documened migrans wihin Ukraine in 2002 and 2010 relaive o he average annual de jure populaion for each sex and five-year age group. The saring poin was daa on oal and inernaional migraion inflows and ouflows by sex and five-year age groups from which we calculaed gross inernal migraion flows and hen gross migraion raes by age and sex according o eq.(5). Figure 3.3. Gross inernal migraion raes by age and urban/rural divide (%), Urban Rural Source: Sae Saisics Service of Ukraine, auhor s calculaions. Noe: The gross migraion raes show he number of all of all documened migrans wihin Ukraine in 2010 relaive o he average annual de jure populaion for each populaion group (urban vs. rural) and five-year age group. The saring poin was daa on oal and inernaional migraion inflows and ouflows by sex, five-year age groups and urban/ rural divide from which we calculaed gross inernal migraion flows for boh sexes and hen gross migraion raes by age and urban/ rural divide according o eq.(5). Daa on migraion flows by age and urban/ rural divide wih disinguishing beween inernaional and inernal flows were no available before Unlike he oher age groups, propensiy of youh (15 o 24 years according o he UN definiion) o migrae wihin he counry increased beween 2002 and 2009 (Figure 3.2). People in heir lae eens and early wenies move for educaion, employmen and family reasons (o leave parens home and sar families) and herefore play an imporan role in boh he iner-regional and rural o urban migraion urnover. However, he primary reason for officially regisered migraion of eens is educaion. 15 Afer compleing heir sudies some of hem come back o heir home regions bu many 15 Many young people cerainly can also have labor marke reasons for migraion bu hese employmen-relaed moves are mos likely o be unregisered as young people can hardly afford o buy an aparmen or find alernaive ways of being officially regisered in he new place of residence. Oher imporan moives for migraion of young people are family reasons. As suggesed by Hazans (2004), radiionally srong family links susained beween relaives living in differen pars of he counry make he ypical ravel-o-find-a-spouse-area larger han one would oherwise expec, and conribue o iner-regional migraion which is no necessarily relaed o labor marke differenials in expeced way. 14

15 find employmen and say in he hos owns and ciies ha are more aracive no only o sudy bu also o work. Given his, migraion o sudy can be ofen seen as a firs sep in labor migraion. Unforunaely, here is no daa on he share of young people moving o sudy and hen saying o work here bu we can draw some conclusions from he official migraion saisics regions for wo age cohors (15-19 and years). The laes available saisics on age profiles of migraion by regions in 2007 (Table A.3 in Annex) reveals ha eens in pursui of pos-secondary and eriary educaion wen predominanly o such educaion ceners as Kyiv, Kharkiv, Dniproperovsk, Odesa, Lviv, Chernivsi and Sevasopol. Alhough ne inflows of eens (15-19 years) o hese regions were accompanied by ne ouflows of heir older counerpars (20-24 years), he number of graduaes moving back o heir home regions or o some oher regions of employmen was significanly smaller han he number of incoming eens moving o sudy. Odesa oblas was he only excepion as i experienced ne migraion gains in all age groups. As a resul, all regions aracing more eens iniially had ne gains of youh populaion as a whole (see column 6 in Table A.3). The paern in mos oher regions was compleely he opposie, wih ne migraion ouflows of eens, ne migraion inflows of young people aged years, and resuling ne losses of youh populaion. Kirovohrad, Rivne, and Ternopil oblass had ne losses in all age groups. Surprisingly, Donesk region which is ranked second in erms of he number of higher educaional insiuions (bu no in erms of he number of sudens per 10,000 people) did no arac more eens from he oher regions han i los. Therefore, here were more imporan facors han he availabiliy of higher educaional insiuions which had affeced decision of young people o oumigrae from his region. As Figures 3.2 and 3.3 also show, females and urban young people under 30 years have a higher propensiy o migrae han heir male and rural counerpars. On he oher hand, men and rural populaion appear o have higher propensiy of changing heir official place of residence in older age when inernal migraion is more likely o be moivaed by labor marke reasons raher han by educaion or marriage. This suggess ha rural adul males are more mobile and reacive o employmen opporuniies ouside heir selemens, and hus have a higher poenial o ease inefficiencies due o he regional dispariies wihin Ukraine. No surprisingly, age groups belonging o he working age caegory in Ukraine (15-24 and 25-59) prevail in migran flows, making up ogeher 82.9 per cen of oal inernal migran flows in 2010 (see Figure 3.4). A worrisome developmen is ha despie huge regional dispariies and urban-rural differences, he number of inernal migrans of working age decreased from 557,128 people in 2002 and 541,297 people in Furhermore, decreasing number and share of working-age aduls (aged beween 25 and 59) along wih increasing number and share of youh implies ha young migrans primarily moivaed by educaion moives have crowded ou hose who a leas hypoheically could move for labor marke reasons. This finding migh also sugges however ha migraion of working-age aduls has no declined and even increased bu for housing-relaed reasons i became more informal (i.e. wihou change of he place of regisraion) and herefore i is concealed from he official migraion saisics. Figure 3.4. Composiion of (gross) inernal migraion by age group and sex (%), 2002 vs