Understanding Migration Responses to Local Shocks

51 Pages Posted: 27 Apr 2022

See all articles by Kirill Borusyak

Kirill Borusyak

University College London - Department of Economics

Rafael Dix-Carneiro

Duke University

Brian Kovak

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management

Date Written: April 14, 2022

Abstract

We examine how to interpret estimates from a commonly used migration regression relating changes in local population to exogenous local labor demand shocks. Using a simple model of local labor markets with mobility costs, we find that common conclusions drawn from migration regression estimates are likely to be substantially misleading. Intuitively, the conventional migration regression is misspecified due to the bilateral nature of location choices. Workers choose where to live based not only on the shock to their current location, but also on the shocks to potential alternative locations, which are omitted from the regression. Analytical results and simulations based on Brazilian data show that conventional migration regression estimates are inaccurate for the within-sample effects of observed shocks on local populations and uninformative on the effects of counterfactual shocks to local labor demand. These problems are particularly acute when workers face industry switching costs in addition to geographic mobility costs. A simple alternative approach leveraging the model's structure exhibits far better performance.

Suggested Citation

Borusyak, Kirill and Dix-Carneiro, Rafael and Kovak, Brian, Understanding Migration Responses to Local Shocks (April 14, 2022). Available at SSRN: https://ssrn.com/abstract=4086847 or http://dx.doi.org/10.2139/ssrn.4086847

Kirill Borusyak (Contact Author)

University College London - Department of Economics

Drayton House, 30 Gordon Street
30 Gordon Street
London, WC1H 0AX
United Kingdom

Rafael Dix-Carneiro

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

Brian Kovak

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management ( email )

Pittsburgh, PA 15213-3890
United States

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