The Effect of Business Cycle Fluctuations on Migration Decisions

Abstract

I examine mechanisms that differentially influence migration behavior in response to labor market shocks between employed and unemployed workers in the US. Over the period of the Great Recession, overall migration rates in the US remained close to their respective long-term trends. However, migration evolved differently by employment status with unemployed workers being more likely to migrate during the recession and employed workers less likely. I estimate a dynamic non-stationary search model of migration, focusing on the role of employment frictions, earnings, and amenities on migration decisions. My results show that employed workers are faced with a large job queuing penalty when moving locations, which results in differing migration incentives for the two groups when faced with adverse labor market shocks. I also find that migration rates were muted because of the national scope of the Great Recession. I show that moving subsidies aimed at mitigating local unemployment are greatly hindered by workers' preferences for amenities.

Keywords: Migration, Recession, Job search, Dynamic discrete choice

JEL Classification: E32, J22, J61, J64, R23