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Title: Population Aging, Migration Spillovers, and the Decline in Interstate Migration

Citation Type: Miscellaneous

Publication Year: 2013

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Abstract: Interstate migration in the United States has declined by 50 percent since the mid-1980s. We study the role of the aging population in this long-run decline. We argue that, in addition to a direct compositional effect on migration, the aging population has an indirect general equilibrium effect through the labor market. We develop a spatial general equilibrium model consisting of two locations with two types of workers who differ in moving costs. Firms prefer hiring workers who have higher moving costs, because their lower outside option allows firms to hire them at lower wages. We show analytically that there is a positive composition externality of high-moving-cost workers on the local labor market: An increase in the fraction of high-moving-cost workers causes firms to recruit more from the local labor market. This increase in the local job-finding rate reduces the migration rate of all workers. We label this effect as migration spillovers. Our quantitative analysis suggests that population aging decreases the annual interstate migration rate by 0.9 percentage points, which accounts for 59 percent of the observed decline. Of this 0.9 percentage points, 78 percent is attributable to the indirect general equilibrium effect of the aging population and only 22 percent is due to the direct effect.

Url: https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr699.pdf

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Authors: Karahan, Fatih; Rhee, Serena

Publisher: Federal Reserve Bank of New York

Data Collections: IPUMS CPS

Topics: Aging and Retirement, Migration and Immigration

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