When Jobs and Talent Cluster, Regional Inequality Becomes Self-Reinforcing

Economic opportunity has a habit of attracting more economic opportunity. Productive firms draw skilled workers; skilled workers attract other firms; better jobs support stronger services and amenities; and successful cities become progressively harder for competing regions to catch. What looks like migration on the surface can therefore be the final link in a much deeper cycle of spatial inequality.

New evidence from Korea offers a revealing view of how that cycle develops. In "Migration and Regional Income Divergence: Evidence from Korea," published in Sustainability, Dong-Jin Pyo and Janghan Kwon of Changwon National University reconstruct nearly three decades of regional change to separate the roles of migration, productivity and capital accumulation.

The study finds that productivity differences began pushing regions apart before population movements did. Migration later changed from a force supporting convergence into one that reinforced divergence, while capital investment increasingly offset part of the widening gap. Korea provides the case, but the underlying policy dilemma travels widely: redistributing people may achieve little when the productive economy itself remains geographically concentrated.

Migration Often Follows the Divide Before It Deepens It

Regional policy frequently treats population loss as the major problem. Shrinking cities worry about young people leaving, falling tax bases and aging populations, while booming metropolitan areas struggle with congestion, housing and infrastructure pressures. Yet focusing on migration alone can reverse cause and effect.

Korea provides a revealing example. The Seoul Metropolitan Area accounts for more than half of the country's population and economic output while occupying only 11.8% of its land. Peripheral industrial centres have meanwhile experienced urban shrinkage and continuing losses of younger talent.

The study finds that Korea's regional income pattern changed substantially over time. Poorer regions showed relatively strong catch-up during 1995–2004, that convergence weakened during 2005–2014, and the relationship moved toward divergence during 2015–2023. The authors caution that the later estimate is imprecise because only seven broad economic regions are examined, but the overall deterioration in convergence is clear in the longer-run pattern.

A major finding is that migration itself changed roles. It initially supported convergence, but around the mid-2000s began contributing to divergence instead. Productivity had already undergone a similar reversal several years earlier. The sequence implies that people increasingly moved within an economy whose opportunities had already become more spatially unequal. Once skilled workers follow the most productive places, their movement can strengthen labor pools, consumption markets, innovation networks and agglomeration effects there, further increasing the gap with regions they leave behind.

For countries struggling with dominant capital cities, the lesson is straightforward: migration may be an outcome of regional imbalance before it becomes a force that magnifies it.

The Real Regional Divide Is Increasingly About Productivity

The authors build a spatial economic model combining forward-looking household migration decisions with regional productivity growth, capital allocation, public amenities and research-and-development activity. The model is calibrated to seven Korean economic areas using data on output, investment, migration, population, amenities and other regional indicators from 1995 to 2023.

Their counterfactual analysis separates the accounting contributions of productivity, population distribution and capital. It suggests that productivity shifted from supporting convergence toward driving divergence around 2000, while migration followed roughly six to seven years later. Capital accumulation moved in the opposite direction and increasingly supported convergence.

This points to a wider transformation in the geography of growth. As economies become more knowledge-intensive, productive activity can benefit disproportionately from clustering. Skilled workers want access to other skilled workers, advanced employers prefer deep labor markets, and innovative firms gain from proximity to suppliers, research institutions and specialist services.

The study links Korea's experience to precisely such a transition. Knowledge-intensive sectors increasingly benefited from agglomeration around Seoul, while the global financial crisis weakened smaller firms and peripheral economies. Skilled-worker outflows then reinforced regional disparities.

The same mechanism can appear in very different settings. In developing economies, a capital city may capture finance, universities, technology companies and government employment while secondary cities remain dependent on lower-productivity activity. In advanced economies, superstar cities can pull ahead through digital services, innovation and high-value professional employment.

Balanced development cannot be reduced to equalizing population numbers. The deeper challenge is to build productive ecosystems outside dominant metropolitan cores.

Infrastructure Helps, but It Cannot Substitute for an Economic Ecosystem

Governments often respond to spatial inequality with physical investment: roads, industrial parks, administrative relocations and major public facilities. Korea's experience suggests such spending can help, but also shows why infrastructure alone may not reverse regional decline.

The study finds that capital accumulation shifted toward supporting convergence, partly offsetting the divergence associated with migration and productivity. The change coincided with major balanced-development and capital-redistribution initiatives introduced in the early 2000s. This rejects the idea that regional investment is futile. Better infrastructure can improve connectivity, raise local amenities and reduce barriers to investment. But physical capital does not automatically generate innovation, entrepreneurial capacity or a pipeline of skilled employment.

A region can receive new roads, public buildings and industrial facilities yet remain economically dependent if firms, research institutions and talent continue concentrating elsewhere. The study itself notes that some Korean balanced-development policies focused heavily on capital redistribution rather than fostering self-sustaining local development.

For policymakers, this calls for a different definition of regional investment. Spending should be judged not only by how evenly infrastructure is distributed but by whether it raises productivity. That means connecting transport and industrial infrastructure with universities, research capacity, skills development, business formation and sectors capable of generating durable local demand.

The lesson is particularly relevant to the Global South, where governments frequently invest in secondary-city infrastructure as part of urbanization strategies. Physical assets can provide the platform for growth, but without productive firms and human capital they risk becoming islands of investment rather than engines of regional transformation.

Balanced Development Means Creating More Places Where Opportunity Can Grow

Mobility can improve individual welfare and help workers find productive employment. Attempts to restrict it can trap people in places with weaker opportunities without fixing the underlying economic disparities. The study instead suggests reducing the productivity and amenity gaps that shape migration decisions. Its model explicitly allows households to consider both economic opportunity and regional amenities, reflecting the fact that people choose locations based on more than wages alone.

Research institutions, innovative firms, technical education, healthcare, transport, cultural amenities and quality public services can all influence whether a region retains workers and attracts investment. Effective policy therefore needs to combine productivity strategy with liveability rather than treating the two as separate agendas.

This also connects regional inequality with SDG 10 on reducing inequalities and SDG 11 on sustainable cities. Excessive concentration can generate congestion and affordability pressures in dominant cities while simultaneously weakening smaller regions through demographic decline and diminished economic capacity.

The study does have important limitations. Its counterfactuals are accounting exercises rather than direct estimates of what particular policies would cause. Migration, productivity and capital respond to overlapping economic forces, so holding one channel fixed is analytically useful but does not replicate a feasible government intervention.

The model also pools capital nationally and combines 17 administrative units into seven broader economic regions, potentially obscuring important differences within metropolitan areas and local capital markets. The authors identify both issues as areas where future research could improve the analysis.

Even so, the broader insight is relevant. Korea demonstrates that regional inequality can become a dynamic feedback system: productivity attracts people, people reinforce agglomeration, and increasingly successful regions become still harder for others to catch.