NATIONAL BUREAU OF ECONOMIC RESEARCH
Department of Economics
Memphis, TN 38112
NBER Working Papers and Publications
|April 2016||Paving the Way to Development: Costly Migration and Labor Market Integration|
with Melanie Morten: w22158
How integrated are labor markets within a country? Labor mobility is key to the integration of local labor markets and therefore to understanding the efficacy of policies to reduce regional inequality. We present a comprehensive framework for understanding migration decisions, focusing on the costs of migrating. We construct and then estimate a spatial equilibrium model where mobility is determined not only by idiosyncratic tastes, but also by moving costs that are origin-destination dependent. We use rich data on the inter-municipality moves of 18 million people together with exogenous variation in the road network caused by the construction of a capital city to identify the bilateral costs of moving between two regions. The mean observed migration cost is between 0.8-1.2 times the mean w...