“Voting with their Feet” in Times of Crisis: The Case of Southern Europe

Abstract

The paper assesses the effect of economic sentiment when combined with the fiscal surplus offered on a Tiebout like migration process, taking place among potential southern European migrants in times of crisis. With an extended sample to incorporate the latest data available and by focusing on the region that was, and still is most heavily affected by the economic crisis, we employ a conditional logit model to find that locational choices are determined by public policies as those are offered to potential migrants in the form of public spending and taxes, the perception of economic opportunities as they are expressed through economic sentiment indicators, while the effect of labor market conditions is consistent and highly relevant. As most of the countries of Southern Europe have entered fiscal adjustment programmes, the discussion becomes particularly relevant as it adds a new dimension to the on-going and heated debate of a significant brain drain from the south to the north of Europe.