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The Effect of Expected Income on Individual Migration Decisions

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  • John Kennan
  • James R. Walker

Abstract

The paper develops a tractable econometric model of optimal migration, focusing on expected income as the main economic influence on migration. The model improves on previous work in two respects: it covers optimal sequences of location decisions (rather than a single once-for-all choice), and it allows for many alternative location choices. The model is estimated using panel data from the NLSY on white males with a high school education. Our main conclusion is that interstate migration decisions are influenced to a substantial extent by income prospects. The results suggest that the link between income and migration decisions is driven both by geographic differences in mean wages and by a tendency to move in search of a better locational match when the income realization in the current location is unfavorable.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9585.

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Date of creation: Mar 2003
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Publication status: published as “The Effect of Expected Income on Individual Migration Decisions” (with James R. Walker), Econometrica 79 (1), January 2011, 211-251
Handle: RePEc:nbr:nberwo:9585

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  1. Robert E. B. Lucas, 1994. "Internal Migration in Developing Countries," Boston University - Institute for Economic Development, Boston University, Institute for Economic Development 43, Boston University, Institute for Economic Development.
  2. Barro, Robert J & Sala-i-Martin, Xavier, 1992. "Convergence," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 100(2), pages 223-51, April.
  3. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
  4. Derek Neal, 1998. "The Complexity of Job Mobility Among Young Men," NBER Working Papers 6662, National Bureau of Economic Research, Inc.
  5. Michael P. Keane & Kenneth I. Wolpin, 1995. "The career decisions of young men," Working Papers, Federal Reserve Bank of Minneapolis 559, Federal Reserve Bank of Minneapolis.
  6. Banks, Jeffrey S & Sundaram, Rangarajan K, 1994. "Switching Costs and the Gittins Index," Econometrica, Econometric Society, Econometric Society, vol. 62(3), pages 687-94, May.
  7. Robert J. Barro & Xavier Sala-i-Martin, 1991. "Convergence across States and Regions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 107-182.
  8. Patricia Reagan & Randall Olsen, 2000. "You can go home again: Evidence from longitudinal data," Demography, Springer, Springer, vol. 37(3), pages 339-350, August.
  9. Tunali, Insan, 2000. "Rationality of Migration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(4), pages 893-920, November.
  10. Kennan, John & Walker, James R., 2010. "Wages, welfare benefits and migration," Journal of Econometrics, Elsevier, Elsevier, vol. 156(1), pages 229-238, May.
  11. Topel, Robert H, 1986. "Local Labor Markets," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 94(3), pages S111-43, June.
  12. Schultz, T Paul, 1982. "Lifetime Migration within Educational Strata in Venezuela: Estimates of a Logistic Model," Economic Development and Cultural Change, University of Chicago Press, University of Chicago Press, vol. 30(3), pages 559-93, April.
  13. Rust, John, 1987. "Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher," Econometrica, Econometric Society, Econometric Society, vol. 55(5), pages 999-1033, September.
  14. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
  15. Peter Gottschalk & Robert Moffitt, 1994. "The Growth of Earnings Instability in the U.S. Labor Market," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(2), pages 217-272.
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