Full Citation
Title: Does Absolute or Relative Income Motivate Migration?
Citation Type: Miscellaneous
Publication Year: 2012
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Abstract: This paper examines whether the desire to improve absolute income or relative income that is, ones position in the income distribution dominates migration choice. Almost all models of migration assume absolute income motivates migration. This is at odds with recent evidence from happiness and life satisfaction surveys that suggest people care about relative income as well as absolute income. A notable exception is the work of Oded Stark who hypothesised that high relative deprivation increases the probability of migration. We argue that, to test between the two main theories absolute income and relative deprivation one needs individual-level panel data on before and after migration outcomes. Indeed, since one has to estimate counterfactual migrant earnings of non-migrants, if migrants are selected on unobservables then cross-sectional estimates will systematically bias the predicted migrant earnings of non-migrants. We estimate the relative importance of the two main theories in explaining interstate migration in the U.S. using a panel of individuals. Relative deprivation is calculated with respect to those persons in the same U.S. state. Our findings are novel and potentially profound. First, for migrants, both income and relative deprivation improve after migration but, the percentage improvement in relative deprivation is much greater than that for income. Second, we find robust evidence that an increase in relative deprivation increases the probability of migration. In contrast, income has no significant effect on migration propensity. Indeed, even after controlling for the estimated gain in income from migration, relative deprivation is the only theory of migration that our data supports.
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Authors: Vernazza, Daniel R.
Publisher: London School of Economics
Data Collections: IPUMS CPS
Topics: Housing and Segregation, Migration and Immigration, Poverty and Welfare
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