Household Migration: Theoretical and Empirical Result

Abstract

A consumption theory of migration is developed which supplements the traditional job search models. Migration, seen as an equilibrating reaction to an initially non-optimal location, is analyzed using standard demand theory. When one groups goods into those that are traded between areas and those that are not (weather, racial discrimination, crime rates, etc.) it is clear that only changing demands for the non-traded goods will result in changing optimal locations (assuming supplies are fixed). Illustrating an increase in family income might lead to an increased demand for non-traded good ‘personal safety.’ This might result, for example, in the substitution (through migration) of a lower crime suburban neighborhood for a higher crime central city neighborhood. An empirically testable implication of the model is that the probability of migration should be positively related to changes in the absolute value of those exogenous variables which lead to altered demands for non-traded goods. This and other hypotheses were examined using cross-sectional data in a nonlinear maximum likelihood (prohibit) regression analysis. The results strongly support the model and its implications.