The Effect of Expected Income on Individual Migration Decisions
James R. Walker, Ohio State University
John Kennan, University of Wisconsin at Madison
The 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 NLSY 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. On the other hand we find no evidence of a response to geographic differences in wage distributions. Instead, the results suggest that the link between income and migration decisions is driven by a tendency to move in search of a better locational match when the income realization in the current location is unfavorable.