The Gift of Moving: Intergenerational Consequences of a Mobility Shock

Abstract

We thank Masao Fukui for extraordinarily excellent research assistance. We would also like to than Elliot Choi for excellent research assistance. We thank ABSTRACTWe exploit a volcanic "experiment" to study the costs and benefits of geographic mobility. We show that moving costs (broadly defined) are very large and labor therefore does not flow to locations where it earns the highest returns. 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 those younger than 25 years old who were induced to move, the "lava shock" dramatically raised lifetime earnings and education. Yet, the benefits of moving were very unequally distributed within the family: Those older than 25 (the parents) were made slightly worse off by the shock. 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.

The Economic Impact of Hurricane Katrina on Its Victims: Evidence from Individual Tax Returns

“…Our findings add to the recent body of literature that empirically demonstrates the economic benefits of relocation (Chetty, Hendren, and Katz 2016, Nakamura, Sigurdsson, and Steinsson 2016. What is different about our findings is that the long-run earnings gains are seen in all age groups and not just younger individuals.…”

“…Recent work using administrative tax returns has reexamined the longer-run impact of MTO, finding substantial gains for young children (Chetty, Hendren, and Katz 2016). Nakamura, Sigurdsson, and Steinsson (2016) show that younger individuals induced to move by a natural disaster in Iceland experienced large lifetime gains in education and earnings, while those older than 25 experienced small but insignificant earnings losses.…”

Migration costs and observational returns to migration in the developing world

“…Our work also follows the earlier literature focused on identifying Roy models of selection, in particular the work of Heckman and Honoré (1990) and Heckman and Vytlacil (2005); French and Taber (2011) provide an overview of the various approaches this literature has taken. Our empirical finding of larger experimental returns than observational returns to migration is broadly consistent with the evidence from the natural experiments studied by Nakamura, Sigurdsson, and Steinsson (2019) and Sarvimäki, Uusitalo, and Jäntti (2019), in which individuals forced to migrate experienced substantial returns on average relative to those staying behind.…”

Making Big Changes: The Impact of Moves on Marriage among U.S. Army Personnel

“…However, there is little direct evidence to substantiate this assumption. In a prominent paper, Kennan and Walker (2011) derive large implicit moving costs in a sample of white, male U.S. workers; and a recent paper exploiting relocation following a volcanic eruption in Iceland finds similarly large implicit moving costs (Nakamura et al 2016). Earlier evidence from the military finds that moves can cause disruptions for children which can place stress on families (Lyle 2006;Engel, Gallagher and Lyle 2010).…”