The Effect of Expected Income on Individual Migration Decisions

TLDR

The study develops a tractable econometric model of optimal migration, centering on expected income as the key driver. The model extends prior work by allowing optimal sequences of location decisions among many alternatives and is estimated with panel data from the National Longitudinal Survey of Youth on white high‑school‑educated males. Interstate migration decisions are substantially influenced by income prospects, driven by geographic wage differences and a search for better locational matches when current income is unfavorable.

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.