The Gift of Moving: Intergenerational Consequences of a Mobility Shock
We 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.
We thank Masao Fukui for extraordinarily excellent research assistance. We would also like to than Elliot Choi for excellent research assistance. We thank Josh Angrist, David Autor, Samuel Bazzi, Gharad Bryan, Thomas Covert, Esther Duflo, Larry Katz, Emir Kamenica, David Lagakos, Melanie Morten, Suresh Naidu, Arash Nekoei, Peter Nilsson, Ben Olken, Parag Pathak, Torsten Persson, Frank Schilbach, Jesse Shapiro, Magnús Torfason, Michael Waugh, and Danny Yagan, as well as seminar participants at various institutions for valuable comments and discussions. We thank Hrafnhildur Arnkelsdóttir, Margrét Indridadóttir, and Hildur Erna Sigurdardóttir at Statistics Iceland and Thórdur Kristjánsson and Kári Stefánsson at deCode Genetics for their invaluable support in developing the data infrastructure for this project, Ragnar Heidar Thrastarson for helping us create a post-eruption map of the Westman Islands, and Jóhann Jónsson for sharing his recollections of the Westman Islands volcanic eruption and its aftermath. We thank the National Science Foundation (grant SES-1056107), the Alfred P. Sloan Foundation, and the Jan Wallander and Tom Hedelius Foundation for financial support. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Emi Nakamura & Jósef Sigurdsson & Jón Steinsson, 2022. "The Gift of Moving: Intergenerational Consequences of a Mobility Shock," The Review of Economic Studies, vol 89(3), pages 1557-1592.