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The Welfare Effects of Encouraging Rural-Urban Migration

Author

Listed:
  • David Lagakos

    () (University of California, San Diego)

  • Mushfiq Mobarak

    (Yale University)

  • Michael Waugh

    (New York University)

Abstract

This paper studies the welfare effects of encouraging rural-urban migration in the developing world. To do so, we build a dynamic incomplete-markets model of migration in which heterogeneous agents face seasonal income fluctuations, stochastic income shocks, and disutility of migration that depends on past migration experience. We calibrate the model to replicate a field experiment that subsidized migration in rural Bangladesh, leading to significant increases in both migration rates and consumption for induced migrants. The model’s welfare predictions for migration subsidies are driven by two main features of the model and data: first, induced migrants tend to be negatively selected on income and assets; second, the model’s non-monetary disutility of migration is substantial, which we validate using newly collected survey data from this same experimental sample. The average welfare gains are similar in magnitude to those obtained from an unconditional cash transfer, and greater than from policies that discourage migration, though migration subsidies lead to larger gains for the poorest households, which have the greatest propensity to migrate.

Suggested Citation

  • David Lagakos & Mushfiq Mobarak & Michael Waugh, 2018. "The Welfare Effects of Encouraging Rural-Urban Migration," Working Papers 2018-002, Human Capital and Economic Opportunity Working Group.
  • Handle: RePEc:hka:wpaper:2018-002
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    File URL: http://humcap.uchicago.edu/RePEc/hka/wpaper/Lagakos_Mobarak_Waugh_2018_welfare-rural-urban.pdf
    File Function: First version, December, 2017
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    References listed on IDEAS

    as
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    Cited by:

    1. Tijan L. Bah & Cátia Batista, 2018. "Understanding willingness to migrate illegally: Evidence from a lab in the field experiment," NOVAFRICA Working Paper Series wp1803, Universidade Nova de Lisboa, Faculdade de Economia, NOVAFRICA.

    More about this item

    Keywords

    rural-urban migration;

    JEL classification:

    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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