The Gift of Moving: Intergenerational Consequences of a Mobility Shock

Abstract

We exploit a volcanic “experiment” to study the costs and benefits of geographic mobility. In our experiment, a third of the houses in a town were covered by lava. People living in these houses were much more likely to move away permanently. For the dependents in a household (children), our estimates suggest that being induced to move by the “lava shock” dramatically raised lifetime earnings and education. While large, these estimates come with a substantial amount of statistical uncertainty. The benefits of moving were very unequally distributed across generations: the household heads (parents) were made slightly worse off by the shock. These results suggest large barriers to moving for the children, which imply that labor does not flow to locations where it earns the highest returns. The large gains from moving for the young are surprising in light of the fact that the town affected by our volcanic experiment was (and is) a relatively high income town. We interpret our findings as evidence of the importance of comparative advantage: the gains to moving may be very large for those badly matched to the location they happened to be born in, even if differences in average income are small.

And Yet It Moves: Intergenerational Mobility in Italy

“…In the spirit of Nakamura et al (2016), we make an attempt to establish causality in the role of provinces as determinants of social mobility by exploiting an exogenous shock that forced 60 Somewhat puzzling, life expectancy remains significant but not with the expected sign. thousands of Italian families to migrate.…”

The Costs of Employment Segregation: Evidence from the Federal Government Under Woodrow Wilson

“…By documenting how federal segregation affected home ownership, we provide new evidence on how a specific discriminatory episode reduced black wealth accumulation using the most comprehensive long-term data available. 5 While other studies have documented how economic shocks echo across generations (Nakamura et al, 2020;Bleakley and Ferrie, 2016;Feigenbaum, 2015;Oreopoulos et al, 2008), it is the specific nature of the shock -a state-sanctioned policy of employment segregation -that, in our view, makes this contribution unique. We document how a past episode of government discrimination can have persistent negative effects on income and wealth accumulation, as well as the outcomes of the next generation.…”

Forced Displacement in History: Some Recent Research

“…What qualifies as economic history is a matter of debate, but one arbitrary definition is that economic history is whatever happened before one was born. In the author's case, the work by Nakamura et al (2021) meets this criterion. They exploit the outbreak of a volcano on the Westman Islands in Iceland in January 1973, 5 months before the author of this paper was born.…”

“…Young people have a sufficiently long-time horizon to be able to benefit from the opportunities available away from a suboptimal location of origin. The work by Nakamura et al (2021) also points to another group of events that can trigger forced displacement: natural disasters.…”

“…Several of the papers mentioned already show results for education as one of several outcomes. For instance, Nakamura et al (2021) show that young people leaving the Westman Islands as a result of the volcano eruption have higher educational attainment than young people whose houses were unaffected by the volcano eruption. The explanation for this result is that most young people on the Westman Islands work in the fishing and fish processing industries that alone account for roughly 70% of income in the Westman Islands (compared to 15% in the rest of Iceland).…”