Net Migration and State Labor Market Dynamics

Abstract

Existing empirical estimates of net migration models are not identified because they lack an explicit measure of expected future conditions. I find that using actual one‐period‐ahead net migration at the state level to control for expectations reduces the strength of the relationship between current wages and net migration by more than one‐third. I use the case of Michigan to show how existing empirical models mischaracterize the response of migration to shocks that are expected to be transitory. I add migration to a labor market model and simulate responses to permanent and transitory demand shocks.