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Title: The Effect of Expected Income on Individual Migration Decisions

Citation Type: Conference Paper

Publication Year: 2000

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Abstract: We build an economic model of individual migration decisions, and we fit it to individual histories, using data from the National Longitudinal Survey of Youth (NLSY). Individual decisions to migrate are modeled as a job search problem in which welfare benefits or other alternative sources of income act as a floor, insuring workers against bad job search outcomes. A worker can draw a wage only by visiting a location, thereby incurring a moving cost. Locations are distinguished by known differences in mean wages, amenity values and alternative income sources. A worker starts the life-cycle in some home location and chooses an optimal sequence of moves before settling down. There is a two-dimensional ranking of locations, ex ante: some places have high wages, and others have attractive fallback options (both adjusted for amenity values). The decision problem is too complicated to be solved analytically, so we proceed by using a discrete approximation that can be solved numerically. State data on welfare benefits and Census data on wages are used to estimate the parameters describing the menu of choices available to individuals, and preference parameter values are selected so as to maximize the likelihood of the migration decisions seen in the NLSY data.

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Authors: Kennan, John; Walker, Jim

Conference Name: Cowles Foundation Conference on Strategy and Decision Making

Publisher Location: Yale University, New Haven, CT

Data Collections: IPUMS USA

Topics: Labor Force and Occupational Structure, Migration and Immigration, Poverty and Welfare

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