MIGRATION AS A WAY TO DIVERSIFY: EVIDENCE FROM RURAL TO URBAN MIGRATION IN THE U.S.

Authors


  • We are indebted to Rachel Friedberg and Vernon Henderson for helpful comments. We also thank the Dubai Initiative at the Kennedy School of Government at Harvard University and Dubai School of Government for financial support. An earlier version of this paper was presented at Brown University, American University of Sharjah, EBES 2010, and 2013 Annual Meeting of Canadian Economic Association. The views expressed in this paper are the views of the authors and do not necessarily reflect the views or policies of the Federal Reserve Bank of Atlanta or the Federal Reserve System.

ABSTRACT

This paper extends the utility maximization model of migration by introducing income and unemployment-related uncertainties as determinants of utility, and analyzes the effects of the informational advantages of migrants. The paper maintains that migration would expand an individual's economic choices and opportunities and allow diversification. Consequently, diversification advantages influence the location decisions of migrants, an effect captured by the correlation of incomes at the origin and potential destinations. We use the discrete choice model based on random utility maximization as the framework for our empirical investigation of migration from the United States rural to urban counties. This paper takes advantage of an equivalent relation between the conditional logit model and Poisson regression to study the migration decisions using aggregate data among a large set of spatial alternatives. The results show that the diversification concerns have significant effects on location decisions of the rural-urban migrants in the United States.

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