The cost of living, labor market opportunities, and the migration decision: A case of misspecification?

Abstract

A large literature has emerged dealing with the economic and non-economic determinants of migration. Among the economic determinants of migration are income levels and rates of change in income in different areas. These variables are designed to measure labor market opportunities both currently and in the future. Invariably, studies which attempt to explain migration utilize nominal measures of income and change in income, not real measures. Yet assuming that individuals are not subject to money illusion, they would be interested in cost of living information as well as in information regarding nominal income and change in income. This paper examines this issue empirically.We demonstrate that some cost of living variables, when included in a migration equation, enter with the expected sign and are statistically significant. We also demonstrate the failure to include such variables in a regression results in misspecification and bias involving some of the variables in the regression.

The cost of living, labor opportunities, and the migration decision: A case of misspecification?: Reply

“…01 level. equation (3) explains a smaller percentage of the variationin the dependentvariable than equation (1). Also note that the results in equation (2) are generally better than the results in equation (3).…”

“…In another paper, one of the authors (Renas [1]) examines gross in-migration between 1965 and 1970 for whites and for nonwhites separately. It was found, both for whites and nonwhites, that a regression which included labor market and fiscal variables in real terms performed no better than a regression which ineludedthese variables in moneyterms (with no separate cost oflivingvariable).…”

Net interstate population growth rates and the Tiebout-Tullock hypothesis: New empirical evidence, 1990–2000

“…related studies, geographically comparable living cost levels are included, although not as a separate variable, but rather in order to create a geographically comparable expected real future income variable. The focus on state-level data parallels numerous earlier studies (Cebula [1974]; Cebula and Belton [1994]; Gale and Heath [2000]; Gallaway and Cebula [1973]; Renas [1978];and Saltz [1998]); however, in part, it also reflects the need to include considerations of geographic living-cost differentials on the one hand (to avoid omitted-variable bias related to morley illusion) and the fortuitous availability of a series of high quality geographically comparable state-level living cost data from McMahon [1991]. Third, the previous-period median single-family housing price inflation rate in each geographic unit (state) is included in the model as a separate variable.…”

“…The data for variable HPIj are obtained from Chao and Cebula [1996, (PIPCj, 1990/COLj, 1990 - (PIPCj, 1981/COLj, 1981 ( P I PCj, 1981/COLj, 1981 where PIPCj, 1990;PIPCj, 1981 The Ij ratio, expressed as a percentage, is taken as the measure of expected future growth in real personal income per capita in state j. In principle, this specification parallels that in Cebula and Belton [1994] and in Gale and Heath [2000] for interstate migration during the 1980s.The three variables SUNSHINE j, JANTEMPj, and WESTj are intended to reflect dements of the quality of life that have previously been found to affect migration patterns (Gallaway and Cebula[1973]; Cebula [1979;1990]; Gale and Heath [2000]; and Renas [1978;). The PE and T variables from the previous section have been combined here into one variable, PETj.…”

Migration and the Tiebout‐Tullock Hypothesis Revisited

“…The PGPCRij ratio, expressed as a percentage, is treated as the measure of the expected future growth rate in real income per capita in state j, i.e., as a measure of expected economic opportunity in state j. In principle, this specification parallels that in Cebula and Belton (1994), Gale and Heath (2000), and Saltz (1998).The variables SUNSHINEj and VCRIMEj are intended to reflect elements of the quality of life that have previously been found to affect migration patterns (Milligan 2000;Conway andHoutenville 1998, 2001;Gallaway and Cebula 1973;Cebula 1979Cebula , 1990Gale and Heath 2000;Renas 1978Renas , 1980and Saltz 1998). The PEj and Tj variables (U.S. Census Bureau 1994, Tables 476, 479) from the previous section have been combined here into a single variable, PETj, as suggested in the different (although somewhat parallel) analysis in Cebula (2002) of net population growth rather than net domestic in-migration.…”