Net Migration and State Labor Market Dynamics

Abstract

I present a simple model of migration in which the net migration rate into a state depends on the expected present value of labor market conditions and amenities. I show that though this is a common model, existing empirical estimates do not separately identify the underlying parameters. The identi cation problem can be thought of as an omitted variable bias because no explicit measure of expected future labor market conditions is included. I use state-level data to estimate empirical models in which the underlying parameters are identi ed. I nd that high wages and low unemployment encourage in-migration, but that the omitted variable bias can be large. For example, when I control for future conditions in one model, the strength of the relationship between current wages and net migration is less than half as large. I integrate the migration model into a simple labor supply and demand framework and use my estimates of the migration model to simulate a labor market's response to permanent and transitory demand shocks. In the short run, net migration responds more to permanent shocks and current wages and employment rates respond more to transitory ones.

How does labor mobility affect income convergence?

“…Regressing net migration on a constructed measure of expected income di erences, Greenwood et al (1991) ÿnd a response equivalent to = 1 5 . Using a di erent methodology to control for future income di erences, Gallin (2004) presents results that suggest that U.S. labor mobility may be in the range 1:5 6 6 2: 3 These estimates are biased towards ÿnding low labor mobility, since they assume that no part of observed wage di erences compensates for varying local quality of life. 4 For illustrative purposes, transition dynamics immediately below are shown when labor is completely immobile, = 0, as well as for 'intermediate' labor mobility, = 1 4 , and "high" labor mobility, = 4.…”

Job Search and Migration in a System of Cities

“…However, migration is an investment, and as a consequence it requires not only a static tradeoff between economic conditions, but also a comparison between expected future economic conditions. This is the argument made by Gallin (2004), who proposes a perfect competition model of migration. However, and despite its interest and obvious links to the present paper, the classic perfect-competition approach cannot fully reconcile the joint existence of low mobility rate with local labor market differences.…”

A real model of transitional growth and competitiveness in China

“…Labor mobility estimates vary widely even for the United States. Barro and Sala-i-Martin (1991)'s estimates imply that χ = 1 25 , whereas it is closer to 1 5 according to the work by Greenwood et al In his work on labor mobility and convergence, Rappaport (2004) also considers the Gallin (2004) estimates which imply 1.5 ≤ χ ≤ 2. The degree of labor mobility in China is hard to gauge.…”