The Welfare Effects of Encouraging Rural-Urban Migration

54 Pages Posted: 17 Jan 2018

See all articles by David Lagakos

David Lagakos

University of California, San Diego (UCSD) - Department of Economics; National Bureau of Economic Research (NBER)

Ahmed Mushfiq Mobarak

Yale School of Management; Yale University - Cowles Foundation

Michael E. Waugh

New York University (NYU), Leonard N. Stern School of Business, Department of Economics

Date Written: January 2018

Abstract

This paper studies the welfare effects of encouraging rural-urban migration in the developing world. To do so, we build a dynamic incomplete-markets model of migration in which heterogenous agents face seasonal income fluctuations, stochastic income shocks, and disutility of migration that depends on past migration experience. We calibrate the model to replicate a field experiment that subsidized migration in rural Bangladesh, leading to significant increases in both migration rates and in consumption for induced migrants. The model’s welfare predictions for migration subsidies are driven by two main features of the model and data: first, induced migrants tend to be negatively selected on income and assets; second, the model’s non-monetary disutility of migration is substantial, which we validate using using newly collected survey data from this same experimental sample. The average welfare gains are similar in magnitude to those obtained from an unconditional cash transfer, though migration subsidies lead to larger gains for the poorest households, which have the greatest propensity to migrate.

Suggested Citation

Lagakos, David and Mobarak, Ahmed Mushfiq and Waugh, Michael E., The Welfare Effects of Encouraging Rural-Urban Migration (January 2018). NBER Working Paper No. w24193. Available at SSRN: https://ssrn.com/abstract=3101991

David Lagakos (Contact Author)

University of California, San Diego (UCSD) - Department of Economics ( email )

9500 Gilman Drive
La Jolla, CA 92093-0508
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ahmed Mushfiq Mobarak

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-5787 (Phone)

HOME PAGE: http://mba.yale.edu/faculty/profiles/mobarak.shtml

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

Michael E. Waugh

New York University (NYU), Leonard N. Stern School of Business, Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States

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