Nonlinearities in Interregional Migration Behavior

Abstract

Traditional “Marshallian” theories predict a linear relationship between internal migration and regional wage differentials. Using panel data on gross place-to-place migration flows in the United States, we estimate a semiparametric version of the modified gravity model and find evidence of a nonlinear effect of wage differentials in line with alternative theories of interregional migration, including the “option value of waiting” theory, liquidity constraints, and wealth-conditioned immobility. Traditionally, the migration decision process is believed to be mainly composed of two criteria: “whether to move” and “where to move.” However, the empirical evidence of nonlinearity found in this study supports the potential presence of another important decision criterion, “when to move” on interregional migration.