The Effect of Expected Income on Individual Migration Decisions

Authors

  • John Kennan,

    1. Dept. of Economics, University of Wisconsin, 1180 Observatory Drive, Madison, WI 53706, U.S.A. and NBER; jkennan@ssc.wisc.edu
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  • James R. Walker

    1. Dept. of Economics, University of Wisconsin, 1180 Observatory Drive, Madison, WI 53706, U.S.A. and NBER; walker@ssc.wisc.edu
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    • The National Science Foundation and the NICHD provided research support. We thank Taisuke Otsu for outstanding research assistance. We also thank the editor and referees for very detailed constructive criticism of several earlier versions of the paper. We are grateful to Joe Altonji, Kate Antonovics, Peter Arcidiacono, Gadi Barlevy. Philip Haile, Bruce Hansen, Igal Hendel, Yannis Ioannides, Mike Keane, Derek Neal, John Pencavel, Karl Scholz, Robert Shimer, Chris Taber, Marcelo Veracierto, Ken Wolpin, Jim Ziliak, and seminar and conference participants at the Chicago Federal Reserve Bank, Carnegie–Mellon, Duke, Iowa, IZA, Ohio State, Penn State, Rochester, SITE, the Upjohn Institute, Virginia, Wisconsin, and Yale for helpful comments.


Abstract

This 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 National Longitudinal Survey of Youth 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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