Working Paper: NBER ID: w24193
Authors: David Lagakos; Ahmed Mushfiq Mobarak; Michael E. Waugh
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.
Keywords: Rural-Urban Migration; Welfare Effects; Migration Subsidies; Consumption; Field Experiments
JEL Codes: J61; O11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| migration subsidies (F22) | migration rates (J61) |
| migration subsidies (F22) | consumption (E21) |
| improved housing conditions (R28) | migration propensity (J61) |
| migration propensity (J61) | migration wages (J61) |
| migration subsidies (F22) | welfare outcomes (I38) |