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Title: Compensating Differentials in a Spatial Equilibrium: A Non-Parametric Approach

Citation Type: Miscellaneous

Publication Year: 2005

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Abstract: This paper explores the linkages between migration and labor market outcomeswith the goal of non-parametrically recovering the role of amenities in residentialsorting decisions. It begins by developing a formal model that characterizes anindividuals residential location decision (US state) as a function of tastes, migrationcosts, and potential earnings, clarifying what can be learned about these decisions fromdata on migration patterns and earnings available in large-scale datasets (e.g., the USCensus). To this end, we adapt existing identification results (Heckman (1990),Heckman and Honore (1990) to a setting in which migration decisions are a function ofboth earnings and non-earnings factors, as well as initial conditions. The final part ofthe paper estimates a just-identified version of this model using 1990 US Census microdata. Estimates demonstrate the ability of the framework to parse the observed USincome distribution and migration patterns in ways that are informative about therelative roles of migration costs, amenities, and earnings in sorting behavior. Specialattention is paid to the implications for measuring returns to education.1

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Authors: Timmins, Christopher; Bayer, Patrick

Publisher: University of Chicago

Data Collections: IPUMS USA

Topics: Labor Force and Occupational Structure, Migration and Immigration

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