STEADY-STATE LABOR TURNOVER AS OPTIMAL HOUSEHOLD BEHAVIOR*

ABSTRACT. Models of the firm with costly labor turnover and models of migration with location-specific consumption amenities are two standard explanations of the co-existence of persistent wage differentials with extensive labor mobility. Labor turnover models postulate a worker quit function where the quit rate is inversely related to the regional wage differential in the steady state. We use amenity-consumption models of migration to show conditions under which this postulate is consistent with household utility maximization. Our model extends standard amenity-consumption analysis by making the value of amenities contingent on the “state” of the household. These household states are defined in terms of demographic, education, and health characteristics and are assumed to follow a Markov process.     

Time,hedonic migration,and household production

"A hedonic migration model is developed where regional amenities are viewed as influencing household production within the framework of the new demand theory. The inputs to household production are goods, time and housing. It is shown that economic growth in the economy as a whole will increase the relative attractiveness of regions that are relatively time-saving, in the sense that they have a lower time elasticity of household production. Hence, migration will flow into time saving regions and housing costs in those regions will rise as real GDP grows." The implied geographical focus is on the United States.     

U.S. North-South labor migration and trade

The authors examine the roles of labor migration and commodity trade in the inter-regional equalization of the real wage rate in the United States. The emphasis is on North-South patterns. Theoretical models are first outlined and then tested using 1960 and 1970 census data and multi-regional input-output data for 1963. It is found that "the pattern of trade-embodied labor flow closely resembled the pattern of direct labor migration." It is also noted that "the South's hierarchical profile of relative plentifulness among age, education, and race-specific categories of work force tended to persist and remain fairly stable between 1960 and 1970.... One plausible hypothesis is that interregional commodity trade is accomplishing the bulk of the requisite adjustment in bringing about the real wage equalization."     

AMENITIES VERSUS LABOR MARKET OPPORTUNITIES: CHOOSING THE OPTIMAL DISTANCE TO MOVE*

ABSTRACT. A recent debate in the regional economics literature has focused attention on the motivation behind an individual's decision to migrate. Human-capital migration models emphasize labor market disequilibria whereas alternative (hedonic) migration models stress households’altered demand for nontraded goods. In this paper, we test the relative importance of these two possible motivations for moving between metropolitan areas. We use an intercity hedonic model to decompose wages into equilibrium and disequilibrium components. We then compare the separate influences of amenities and the disequilibrium component of wages on the distance moved between two metropolitan areas. Our findings indicate that both economic factors and amenity differentials are significant factors in explaining regional migration.     

REGIONAL WAGE DIFFERENTIALS AND RACE: 1973-1978*

ABSTRACT. The intertemporal structure of regional nominal-wage differentials by race is estimated using panel data from 1973 through 1978. This allows for a more complete analysis of the time pattern of changes in wage differentials, which is not possible from cross-sectional studies. The findings indicate that, in addition to the presence of substantial locational differentials, there was a systematic change in the differentials over time.     

Migration and market wage risk

The author presents an approach to the analysis of labor migration that incorporates the role of market wage variability as a source of information in individual migration decisions. "The focus...is on quantifying the effects of the origin market acting through amenities and the share of market-specific wage variability as it affects forecasts of alternative wages and forecast precision. A subsample of employed males...from the [U.S.] National Longitudinal Survey of Youth (NLS) age 16 to 22 years is used for estimation. The empirical results are consistent with the theoretically predicted relationship between migration propensities and regional differences in the information content of wages. In addition, the results provide evidence that risk aversion deters migration given uncertainty, measured by forecast precision, about alternative market wage levels."     

SOMETIMES CLOSE IS GOOD ENOUGH: THE VALUE OF NEARBY ENVIRONMENTAL AMENITIES*

ABSTRACT An extensive empirical literature exists, showing that variations in region‐specific amenities can account for persistent differences in real wages across regions. However, this literature has considered only amenities in the same location as the household. This paper argues that environmental amenities at some distance from but accessible to urban areas may lead to negative compensating wage differentials. We use a general equilibrium framework and data from the 1995 Current Population Survey to calculate implicit amenity prices based on measures of distance to environmental amenities. Our results suggest that amenities outside the metropolitan area do generate compensating wage differentials, as workers are willing to accept lower wages to live in accessible proximity to “nice” places. This implies that these places provide a positive externality to those communities that find them accessible. The estimated effects are quantitatively important, suggesting that these externalities should be taken into account in policy making.     

TOTAL FACTOR PRODUCTIVITY GROWTH IN MANUFACTURING FURTHER EVIDENCE FROM THE STATES*

In this paper, we first develop a measure of total factor productivity (TFP) growth and summarize a source-of-growth analysis for the manufacturing sector of 48 states. As have others, we find little association between TFP growth differentials and output growth differentials for census regions. At the staterather than the regional level, however, we find a positive association between TFP growth and output growth. We use cross-sectional data to estimate the determinants of the variation in TFP growth. Two results emerge that are important for regional policy and for understanding national productivity trends. First, state investments in education and in transportation infrastructure may affect TFP growth. Second, energy price increases in the early 1970s had no differential effects on productivity growth across states. We also explore the determinants of manufacturing output growth and find that TFP growth, demand growth, wage growth, wage levels, and state corporate income tax rates are significant.     

Net migration estimation in an extended,multiregional gravity model

A multi-regional framework is developed in order to analyze net migration over time to all 10 Canadian provinces within an integrated system of equations. "An extended gravity model is the basis for the equation specification and the use of constrained econometric estimation techniques allows for the provincial interdependence of the migration decision while at the same time ensuring that an important system-wide requirement is respected." The model is estimated using official Canadian data for the 1960s and 1970s. "The results suggest the predominance of the push factor for interprovincial migration for most provinces, although net migration to the Atlantic provinces is also shown to be subject to pull forces from the rest of the country." The effects of wage rate variables, unemployment, and political disturbances in Quebec on inter-provincial migration are noted.     

The determinants of labor migration in Egypt

The factors which affect individual decisions with regard to geographic movement in Egypt are examined and the magnitude in which each factor exerts its influence on aggregate geographic labor supply adjustments is estimated. The spatial unit used in the study is the administrative region, of which there are 25. No effort is made to esimate the impact which migration has had on the origin or destination region. The migrant will presumably choose that destination which, given his information, the migrant thinks will be best. The model which is employed attempts to explain gross interregional migration without the explicit introduction of an individual decision function. Rather, migration is related to certain aggregate proxy variables. Among the independent variables employed in the analysis are (origin and destination) income, education, urbanization, and population. The other explanatory variable used is the distance between region i and region j. The migration measure employed refers to cumulative male migration which occurred prior to 1960; the independent variables are defined for a given point in time (1960). The independent variables explain a reasonably large percentage of the variance in migration between regions in Egypt. All variables were significant at the 5% level or better. The findings indicate that distance acts as an important impediment to migration. Migration is away from low wage and toward high wage regions, which may have contributed to a narrowing of regional wage differentials. Migrants are attracted to regions which have large populations and to regions which have a large percentage of urban to total population. A tendency exists for migrants to come from regions with large populations. There is also some tendency for migrants to come from regions which have a relatively large urban population. Migrants do not appear to come from regions with high educational levels.     

REGIONAL HETEROGENEITY IN WAGE DISTRIBUTIONS: EVIDENCE FROM SPAIN*

ABSTRACT Regional differences in real wages have been shown to be both large and persistent in the United States and the U.K., as well as in the economies of other countries. Empirical evidence suggests that wage differentials adjusted for the cost of living cannot only be explained by the unequal spatial distribution of characteristics determining earnings. Rather, average wage gap decomposition reveals the important contribution made by regional heterogeneity in the price assigned to these characteristics. This paper proposes a method for assessing regional disparities in the entire wage distribution and for decomposing the effect of differences across regions in the endowments and prices of the characteristics. The hypothesis forwarded is that the results from previous studies obtained by comparing average regional wages may be partial and nonrobust. Empirical evidence from a matched employer–employee dataset for Spain confirms marked differences in wage distributions between regions, which do not result from worker and firm characteristics but from the increasing role of regional differences in the return to human capital.     

Population Change and Regional Development in China: Insights Based on the 2000 Census

The People's Republic of China conducted its fifth population census in November 2000. This paper draws from that census and recent data to examine national and regional demographic changes in China over the past two decades. Nationally, the impact of fertility decline on rates of population growth, age composition, and household size is investigated. Regional population trends include the rising population share of the eastern region as a result of population growth due to migration and in response to the widening economic gap between coastal and interior China. Demographic differentials between the eastern region and the rest of China (i.e., in proportion of working-age population, household size, sex ratio, and levels of urbanization and educational attainment) suggest that migration is playing an increasingly important role in shaping regional population distribution and that the acceleration of uneven regional development poses a major challenge to policy makers. Journal of Economic Literature, Classification Numbers: J11, J61, O15. 4 figures, 5 tables, 52 references.     

Urban bound migration and rural investment: the case of Mexico

The authors investigate an agriculturally based policy for improving rural incomes and for retarding the rural-urban migration flow. The production of agricultural goods is characterized by a production function in which output increases with increases in agricultural labor inputs, capital, public infrastructure, land, and technology. Differences among regions in agricultural technology will reflect regional differences in education, the institutionalized form of productive organization, and differences in access to technological information channeled through more technically advanced cities. To pick up the effect of out-migration changes in state agricultural labor supply and upon agricultural output, the state's agricultural out-migration rate is included together with the agricultural labor force. The gross migrant flow between 2 locations is hypothesized to depend upon a set of variables influencing the individual's perception of the economic rate of return to be gained by moving, a set of variables reflecting the individual's propensity to relocate, the labor displacement effects of investments, and the at risk population at 1 location available to migrate. It is also taken into account that individuals differ in their response to information about origin and destination wage differentials and that individuals may or may not perceive a new ecnomic gain from migration but may base the decision on other considerations. Results of a statistical analysis using data from the Mexican census of population for 1960 and 1970 are: 1) size of the rural labor force was negatively associated with agricultural wages, contrary to expectations; 2) small farmers have benefited from the expansion of irrigation in Mexico; and 3) higher urban wages attract migration, and higher growth rate of agricultural income retards rural-urban migration. With respect to the 1950-60 decade both agricultural income and rural out-migration impacts could have been substantial but both the impact on local urban growth and on the rate of in-migration to the primate city would have been slight.     

The effects of internal migration on regional wage and unemployment disparities in Canada

"This paper examines the role of the migration mechanism in the context of a general interregional factor flow adjustment model. Using an estimation technique, which pools cross-section and time series data, the direct effects of migration flows and regional investment on the growth of regional wages and unemployment [in Canada] are examined. The results suggest that migration has a small, but significant impact on regional wages and unemployment rates."     

Multiperiod migration patterns: the timing and frequency of household responses

"The structure of intertemporal patterns of household migration responses is empirically examined. The findings indicate that migration decisions are often related to changes in household conditions in both prior as well as following periods, are dependent on the duration of household status characteristics (e.g., marital status) and not just their presence at any point in time, and finally that migration response in any particular period very often differs among households as a result of differences in the underlying structure of migration frequency behavior. These findings suggest that inferences based on comparisons of household migration responses over only a single period of time are incomplete, possibly to the point of being misleading." The study is based on a calculation of "the distribution of migration patterns between 1976 and 1979 for a sample of 4,739 households in the [U.S.] Michigan Panel Survey on Income Dynamics (PSIC)."     

ESTIMATING INTERREGIONAL UTILITY DIFFERENTIALS*

ABSTRACT The major objective of this paper is to estimate regional utility levels based on interregional migration data. We first revealed three stylized facts concerning migration behavior by examining long‐term Japanese data on interregional migration. We then uncovered inconsistency between net migration and utility differential in the presence of distance‐related migration costs. Based on the stylized facts and the inconsistency problem, we formulated an operational model and estimated interregional utility differentials. We showed that the interregional utility differentials converged until the late 1970s. We also showed that the utility estimates are highly correlated with the per capita real income. We also applied the model to interregional migration data in the United States and Canada and confirmed the model's validity.     

THE IMPACT OF MIGRATION ON REGIONAL WAGE INEQUALITY: A SEMIPARAMETRIC APPROACH

According to economic theory, regional migration is a primary mechanism through which regional wage convergence is predicted to occur. However, this does not necessarily imply that regional migration has an equalizing effect on regional inequality. Despite considerable literatures on regional migration and regional wage inequality, little attention has focused on the relationship between the two. This paper investigates one of the primary mechanisms through which migration affects individual region's wage distributions. It adopts a semiparametric procedure to examine how the regional wage distributions in Great Britain have changed as a result of migration using British Household Panel Survey data for 1991–2007.     

Stable state conditions of population-dependent migration models under a zero natural growth rate

The author "attempts to examine the stable conditions of regional population under a zero natural growth rate in the context of a certain general class of [population-dependent] nonlinear migration models." Theorems regarding the stable state conditions of the migration models are presented. The parameters of the gravity migration model are then estimated empirically using data on Japanese inter-prefectural migration flows in 1966, 1970, and 1975. The possibility of achieving the stable state in Japan is discussed     

Moving back vs. moving on: the concept of home in the decision to remigrate

"This study examines the effect of information and psychic costs on the remigration propensity of the U.S. labor force. Specifically, the study investigates how the proximity of a potential migration destination to a previous residence, and familiarity with this residence, affect information and psychic costs, and thus, remigration propensity. In this respect it is hypothesized that familiarity with, and location of, a prior residence are significant determinants of both the migration destination and the allocative efficiency of the remigration process." Several specific hypotheses are developed and tested using data on interstate, nonreturn, repeat migration of the white male labor force over the period 1965-1970.     

Real wage rigidity in regional labor markets in the U.K., the U.S., and West Germany

"This paper examines the extent to which regional differences in wage rigidity exist and can help explain interregional differences in unemployment trends. Phillips-curve models of manufacturing wage inflation are estimated for the 10 largest states in the U.S., the 10 economic regions in the United Kingdom, and the 11 Lande in the Federal Republic of Germany over the 1971 to 1985 period. There is evidence of significant differences in the responsiveness of wage inflation to unemployment and the rate of change in consumer prices across the regions within each country and across the three nations."