Job Market Paper:
“Does Absolute or Relative Income Motivate Migration?”, Working Paper, December
2012
This paper examines the extent to which relative income -- that is, one's
position in the income distribution -- matters in migration choice. Virtually
all studies of migration focus on absolute income. This is at odds with the
mounting evidence that suggests people care about their relative position in the
income distribution. We argue that, in order to test between the absolute income
and relative income theories of migration, one needs individual-level panel data
on before and after migration outcomes. Indeed, since one has to estimate
counterfactual migrant earnings of non-migrants, if migrants are selected on
unobservables then cross-sectional estimates will systematically bias the
predicted migrant earnings of non-migrants. We estimate the relative importance
of the two main theories in explaining interstate migration in the U.S. using a
panel of individuals. Relative income is calculated with respect to those
persons in the same U.S. state. We find that, although migration leads to a
substantial rise in absolute income, the trigger for migration is low relative
income and not low absolute income.
Other Papers:
“Wealth, Intertemporal Choice and Return Migration”, Working Paper, September
2012
This paper shows analytically that, under some conditions, return migration is
optimal. We build a model where consumers choose either to: (1) permanently
migrate; (2) never migrate; or (3) migrate and subsequently return. To generate
an incentive for return migration, the model assumes a nominal income
differential between the source and destination and a compensating differential
-- which exerts a counter-balancing force to the income differential. Examples
of compensating differentials may include differences between the source and
destination in climate, place attachment, price levels, unemployment and average
consumption. We characterise the optimal migration decision space with respect
to the three key variables: initial wealth, the income differential and the
compensating differential between the source and destination. We make two key
assumptions. First, consumption and time usage (hours worked and leisure) have
to be spent in the region of residence. Second, marginal utility of consumption
and time usage is assumed to be location-dependent. Intuitively, when the region
with the best economic opportunities is not the source region, there is a
trade-off between income maximisation on the one hand and the marginal utility
of consumption and time usage on the other. Those with low wealth are more
likely to migrate and, conditional on migration, those with higher wealth are
more likely to return migrate, all else equal. We present some empirical
evidence that is consistent with the model.
“Place Attachment, Job Search and Migration: A Structural Estimation”, Working
Paper, September 2012
This paper seeks to estimate a key obstacle to migration: place attachment.
Place attachment refers to the emotional bonds a person feels towards the place
(or area) he or she resides. We estimate place attachment within a structural
model of spatial job search where migration is a by-product of accepting a job
offer from another region. The paper can broadly be split into two parts. The
first takes a standard job search model and adapts it to allow search in many
potential destinations. Acceptance of an offer from a destination necessarily
involves migration to that destination and its associated costs. We consider two
types of costs: a cost of migration that is related to distance-to-destination
and a non-pecuniary cost of leaving the current region. The latter is deemed to
be the negative of place attachment. In the second part, we estimate the
structural model for a sample of individual durations in a U.S. state. Our
estimates suggest that place attachment is steeply increasing in duration for
our reduced-form model; however, the opposite is true for our structural model.
We also find that for half the population, the dollar values of place attachment
are prohibitively large.