The Macroeconomics of Rural-Urban Migration
This paper uses new tracking surveys for several developing countries to analyze rural-urban migration and their macroeconomic implications. We document that migrants from rural to urban areas typically experience large consumption growth one year after migrating, though overall migration rates are low. To understand these facts we build a model that generates a rural-urban gap in average consumption due to three factors: income risk from migration, worker sorting, and disutility from migration. We structurally estimate the model and assess the relative importance of each factor in explaining rural-urban consumption gaps. We then cross-check the model’s predictions using evidence from a controlled migration experiment. Quantitative experiments using the model provide guidance about the quantitative importance of migration policy on aggregate consumption growth.
Lagakos, D.; Mobarak, M.; Waugh, M.E. The Macroeconomics of Rural-Urban Migration. International Growth Centre (IGC), London, UK (2015) 11 pp.