IDEAS home Printed from https://ideas.repec.org/a/aea/aejapp/v9y2017i2p219-55.html
   My bibliography  Save this article

Wealth Heterogeneity and the Income Elasticity of Migration

Author

Listed:
  • Samuel Bazzi

Abstract

How do income shocks affect international migration flows from poor countries? Income growth not only increases the opportunity cost of migration but also eases liquidity constraints. I develop a method to separate these countervailing individual effects and identify the overall income elasticity of migration. Using new administrative and census data from Indonesia, I find that positive agricultural income shocks increase labor emigration flows, particularly in villages with relatively more small landholders. However, in the most developed rural areas, persistent income shocks reduce emigration. Overall, the findings highlight the important role of wealth heterogeneity in shaping migration flows as incomes rise.

Suggested Citation

  • Samuel Bazzi, 2017. "Wealth Heterogeneity and the Income Elasticity of Migration," American Economic Journal: Applied Economics, American Economic Association, vol. 9(2), pages 219-255, April.
    • Handle: RePEc:aea:aejapp:v:9:y:2017:i:2:p:219-55
    Note: DOI: 10.1257/app.20150548
    as

    Download full text from publisher

    File URL: https://www.aeaweb.org/articles?id=10.1257/app.20150548
    Download Restriction: no
    File URL: https://www.aeaweb.org/content/file?id=3974
    Download Restriction: no
    File URL: https://www.aeaweb.org/articles/attachments?retrieve=fvyGyEJTrf92ArvcNwpuMO3dJvfTGW_d
    Download Restriction: no
    File URL: https://www.aeaweb.org/articles/attachments?retrieve=aZDHPrmYr_daa1rb8PjIEU77-hZnitDQ
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. David McKenzie & Caroline Theoharides & Dean Yang, 2014. "Distortions in the International Migrant Labor Market: Evidence from Filipino Migration and Wage Responses to Destination Country Economic Shocks," American Economic Journal: Applied Economics, American Economic Association, vol. 6(2), pages 49-75, April.
    2. Gharad Bryan & Shyamal Chowdhury & Ahmed Mushfiq Mobarak, 2014. "Underinvestment in a Profitable Technology: The Case of Seasonal Migration in Bangladesh," Econometrica, Econometric Society, vol. 82(5), pages 1671-1748, September.
    3. Xavier Gabaix & Rustam Ibragimov, 2011. "Rank - 1 / 2: A Simple Way to Improve the OLS Estimation of Tail Exponents," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 29(1), pages 24-39, January.
    4. Tullio Jappelli & Luigi Pistaferri, 2014. "Fiscal Policy and MPC Heterogeneity," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(4), pages 107-136, October.
    5. Halliday, Timothy, 2006. "Migration, Risk, and Liquidity Constraints in El Salvador," Economic Development and Cultural Change, University of Chicago Press, vol. 54(4), pages 893-925, July.
    6. Victoria Hosegood & Anne Case & Cally Ardington, 2009. "Labor Supply Responses to Large Social Transfers: Longitudinal Evidence from South Africa," American Economic Journal: Applied Economics, American Economic Association, vol. 1(1), pages 22-48, January.
    7. Jonathan Eaton & Samuel S. Kortum & Sebastian Sotelo, 2012. "International Trade: Linking Micro and Macro," NBER Working Papers 17864, National Bureau of Economic Research, Inc.
    8. James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 475-492, National Bureau of Economic Research, Inc.
    9. Stark, Oded & Levhari, David, 1982. "On Migration and Risk in LDCs," Economic Development and Cultural Change, University of Chicago Press, vol. 31(1), pages 191-196, October.
    10. Attanasio, Orazio & Low, Hamish & Sánchez-Marcos, Virginia & Levell, Peter, 2015. "Aggregating Elasticities: Intensive and Extensive Margins of Female Labour Supply," CEPR Discussion Papers 10732, C.E.P.R. Discussion Papers.
    11. Alwyn Young, 2013. "Inequality, the Urban-Rural Gap, and Migration," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(4), pages 1727-1785.
    12. Yair Mundlak & Donald Larson & Rita Butzer, 2004. "Agricultural dynamics in Thailand, Indonesia and the Philippines," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 48(1), pages 95-126, March.
    13. David Lagakos & Michael E. Waugh, 2013. "Selection, Agriculture, and Cross-Country Productivity Differences," American Economic Review, American Economic Association, vol. 103(2), pages 948-980, April.
    14. Roc Armenter & Mikl?s Koren, 2014. "A Balls-and-Bins Model of Trade," American Economic Review, American Economic Association, vol. 104(7), pages 2127-2151, July.
    15. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    16. Neil McCulloch, 2008. "Rice Prices And Poverty In Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 44(1), pages 45-64.
    17. Abramitzky, Ran & Boustan, Leah Platt & Eriksson, Katherine, 2013. "Have the poor always been less likely to migrate? Evidence from inheritance practices during the age of mass migration," Journal of Development Economics, Elsevier, vol. 102(C), pages 2-14.
    18. Bharadwaj, Prashant, 2015. "Fertility and rural labor market inefficiencies: Evidence from India," Journal of Development Economics, Elsevier, vol. 115(C), pages 217-232.
    19. Matthieu Delpierre, 2012. "The impact of liquidity constraints and imperfect commitment on migration decisions of offspring of rural households," Review of Economics of the Household, Springer, vol. 10(1), pages 153-170, March.
    20. Michael A. Clemens, 2014. "Does development reduce migration?," Chapters, in: Robert E.B. Lucas (ed.), International Handbook on Migration and Economic Development, chapter 6, pages 152-185, Edward Elgar Publishing.
    21. Deaton, Angus, 1991. "Saving and Liquidity Constraints," Econometrica, Econometric Society, vol. 59(5), pages 1221-1248, September.
    22. Sharon Maccini & Dean Yang, 2009. "Under the Weather: Health, Schooling, and Economic Consequences of Early-Life Rainfall," American Economic Review, American Economic Association, vol. 99(3), pages 1006-1026, June.
    23. Orrenius, Pia M. & Zavodny, Madeline, 2005. "Self-selection among undocumented immigrants from Mexico," Journal of Development Economics, Elsevier, vol. 78(1), pages 215-240, October.
    24. Graeme Hugo, 2000. "The Impact of the Crisis on Internal Population Movement in Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 36(2), pages 115-138.
    25. Xavier Gabaix, 2009. "Power Laws in Economics and Finance," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 255-294, May.
    26. Gabaix, Xavier & Ibragimov, Rustam, 2011. "Rank − 1 / 2: A Simple Way to Improve the OLS Estimation of Tail Exponents," Journal of Business & Economic Statistics, American Statistical Association, vol. 29(1), pages 24-39.
    27. Michael A. Clemens, 2011. "Economics and Emigration: Trillion-Dollar Bills on the Sidewalk?," Journal of Economic Perspectives, American Economic Association, vol. 25(3), pages 83-106, Summer.
    28. Mckenzie, David & Rapoport, Hillel, 2007. "Network effects and the dynamics of migration and inequality: Theory and evidence from Mexico," Journal of Development Economics, Elsevier, vol. 84(1), pages 1-24, September.
    29. María Engracia Rochina-Barrachina, 1999. "A New Estimator for Panel Data Sample Selection Models," Annals of Economics and Statistics, GENES, issue 55-56, pages 153-181.
    30. Mitali Das & Whitney K. Newey & Francis Vella, 2003. "Nonparametric Estimation of Sample Selection Models," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(1), pages 33-58.
    31. Paul Castañeda Dower & Elizabeth Potamites, 2014. "Signalling Creditworthiness: Land Titles, Banking Practices, and Formal Credit In Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 50(3), pages 435-459, December.
    32. Robert E.B. Lucas (ed.), 2014. "International Handbook on Migration and Economic Development," Books, Edward Elgar Publishing, number 15465.
    33. David I. Levine & Dean Yang, 2014. "The Impact of Rainfall on Rice Output in Indonesia," NBER Working Papers 20302, National Bureau of Economic Research, Inc.
    34. Rosenzweig, Mark R & Stark, Oded, 1989. "Consumption Smoothing, Migration, and Marriage: Evidence from Rural India," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 905-926, August.
    35. repec:adr:anecst:y:1999:i:55-56:p:06 is not listed on IDEAS
    36. Richard Blundell & Antoine Bozio & Guy Laroque, 2011. "Labor Supply and the Extensive Margin," American Economic Review, American Economic Association, vol. 101(3), pages 482-486, May.
    37. David McKenzie & John Gibson & Steven Stillman, 2010. "How Important Is Selection? Experimental vs. Non-Experimental Measures of the Income Gains from Migration," Journal of the European Economic Association, MIT Press, vol. 8(4), pages 913-945, June.
    38. Soo, Kwok Tong, 2005. "Zipf's Law for cities: a cross-country investigation," Regional Science and Urban Economics, Elsevier, vol. 35(3), pages 239-263, May.
    39. Kaivan Munshi, 2003. "Networks in the Modern Economy: Mexican Migrants in the U. S. Labor Market," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(2), pages 549-599.
    40. George J. Borjas, 2021. "Self-Selection and the Earnings of Immigrants," World Scientific Book Chapters, in: Foundational Essays in Immigration Economics, chapter 4, pages 69-91, World Scientific Publishing Co. Pte. Ltd..
    41. Seema Jayachandran, 2006. "Selling Labor Low: Wage Responses to Productivity Shocks in Developing Countries," Journal of Political Economy, University of Chicago Press, vol. 114(3), pages 538-575, June.
    42. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(2), pages 441-487.
    43. Anna Mayda, 2010. "International migration: a panel data analysis of the determinants of bilateral flows," Journal of Population Economics, Springer;European Society for Population Economics, vol. 23(4), pages 1249-1274, September.
    44. Manuela Angelucci, 2015. "Migration and Financial Constraints: Evidence from Mexico," The Review of Economics and Statistics, MIT Press, vol. 97(1), pages 224-228, March.
    45. Treb Allen, 2014. "Information Frictions in Trade," Econometrica, Econometric Society, vol. 82, pages 2041-2083, November.
    46. Poirier, Dale J., 1980. "Partial observability in bivariate probit models," Journal of Econometrics, Elsevier, vol. 12(2), pages 209-217, February.
    47. Constant, Amelie F., 2011. "Sizing It Up: Labor Migration Lessons of the EU Enlargement to 27," IZA Discussion Papers 6119, Institute of Labor Economics (IZA).
    48. David Dawe, 2008. "Can Indonesia Trust The World Rice Market?," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 44(1), pages 115-132.
    49. Hatton, Timothy J. & Williamson, Jeffrey G., 1998. "The Age of Mass Migration: Causes and Economic Impact," OUP Catalogue, Oxford University Press, number 9780195116519.
    50. Wimanda, Rizki E., 2009. "Price variability and price convergence: Evidence from Indonesia," Journal of Asian Economics, Elsevier, vol. 20(4), pages 427-442, September.
    51. Benjamin, Dwayne, 1995. "Can unobserved land quality explain the inverse productivity relationship?," Journal of Development Economics, Elsevier, vol. 46(1), pages 51-84, February.
    52. Grogger, Jeffrey & Hanson, Gordon H., 2011. "Income maximization and the selection and sorting of international migrants," Journal of Development Economics, Elsevier, vol. 95(1), pages 42-57, May.
    53. Steven T. Yen, 2005. "A Multivariate Sample-Selection Model: Estimating Cigarette and Alcohol Demands with Zero Observations," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(2), pages 453-466.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Parag Mahajan & Dean Yang, 2020. "Taken by Storm: Hurricanes, Migrant Networks, and US Immigration," American Economic Journal: Applied Economics, American Economic Association, vol. 12(2), pages 250-277, April.
    2. Gröger, André, 2021. "Easy come, easy go? Economic shocks, labor migration and the family left behind," Journal of International Economics, Elsevier, vol. 128(C).
    3. Kleemans, Marieke, 2015. "Migration Choice under Risk and Liquidity Constraints," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 200702, Agricultural and Applied Economics Association.
    4. Michael A. Clemens & Mariapia Mendola, 2020. "Migration from Developing Countries: Selection, Income Elasticity, and Simpson’s Paradox," Working Papers 539, Center for Global Development.
    5. Djajic, Slobodan & Kirdar, Murat G. & Vinogradova, Alexandra, 2016. "Source-country earnings and emigration," Journal of International Economics, Elsevier, vol. 99(C), pages 46-67.
    6. Bertoli, Simone & Moraga, Jesús Fernández-Huertas & Guichard, Lucas, 2020. "Rational inattention and migration decisions," Journal of International Economics, Elsevier, vol. 126(C).
    7. Spitzer, Yannay & Zimran, Ariell, 2018. "Migrant self-selection: Anthropometric evidence from the mass migration of Italians to the United States, 1907–1925," Journal of Development Economics, Elsevier, vol. 134(C), pages 226-247.
    8. Ran Abramitzky & Leah Boustan, 2017. "Immigration in American Economic History," Journal of Economic Literature, American Economic Association, vol. 55(4), pages 1311-1345, December.
    9. Clemens, Michael A. & Pritchett, Lant, 2019. "The new economic case for migration restrictions: An assessment," Journal of Development Economics, Elsevier, vol. 138(C), pages 153-164.
    10. Michael Clemens, 2014. "Does Development Reduce Migration? - Working Paper 359," Working Papers 359, Center for Global Development.
    11. Simon Winter, 2020. "“It’s the Economy, Stupid!”: On the Relative Impact of Political and Economic Determinants on Migration," Population Research and Policy Review, Springer;Southern Demographic Association (SDA), vol. 39(2), pages 207-252, April.
    12. repec:ipg:wpaper:17 is not listed on IDEAS
    13. repec:ipg:wpaper:2013-017 is not listed on IDEAS
    14. Abramitzky, Ran & Boustan, Leah Platt & Eriksson, Katherine, 2013. "Have the poor always been less likely to migrate? Evidence from inheritance practices during the age of mass migration," Journal of Development Economics, Elsevier, vol. 102(C), pages 2-14.
    15. Luca Marchiori & Jean Francois Maystadt & Ingmar Schumacher, 2013. "Is environmentally," Working Papers 2013-17, Department of Research, Ipag Business School.
    16. Michael A. Clemens, 2014. "Does development reduce migration?," Chapters, in: Robert E.B. Lucas (ed.), International Handbook on Migration and Economic Development, chapter 6, pages 152-185, Edward Elgar Publishing.
    17. Selod, Harris & Shilpi, Forhad, 2021. "Rural-urban migration in developing countries: Lessons from the literature," Regional Science and Urban Economics, Elsevier, vol. 91(C).
    18. Cai, Shu, 2020. "Migration under liquidity constraints: Evidence from randomized credit access in China," Journal of Development Economics, Elsevier, vol. 142(C).
    19. Ferrie, Joseph & Hatton, Timothy J., 2013. "Two Centuries of International Migration," IZA Discussion Papers 7866, Institute of Labor Economics (IZA).
    20. Nina Neubecker & Marcel Smolka & Anne Steinbacher, 2017. "Networks And Selection In International Migration To Spain," Economic Inquiry, Western Economic Association International, vol. 55(3), pages 1265-1286, July.
    21. Cynthia Kinnan & Shing-Yi Wang & Yongxiang Wang, 2015. "Relaxing Migration Constraints for Rural Households," NBER Working Papers 21314, National Bureau of Economic Research, Inc.
    22. Friebel, Guido & Manchin, Miriam & Mendola, Mariapia & Prarolo, Giovanni, 2018. "International Migration Intentions and Illegal Costs: Evidence from Africa-to-Europe Smuggling Routes," IZA Discussion Papers 11978, Institute of Labor Economics (IZA).

    More about this item

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J43 - Labor and Demographic Economics - - Particular Labor Markets - - - Agricultural Labor Markets
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aejapp:v:9:y:2017:i:2:p:219-55. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.