The Federal Reserve Board eagle logo links to home page
Finance and Economics Discussion Series
The Finance and Economics Discussion Series logo links to FEDS home page Net Migration and State Labor Market Dynamics
Joshua Hojvat Gallin

Abstract: I present a simple model of migration in which the net migration rate into a state depends on the expected present value of labor market conditions and amenities. I show that though this is a common model, existing empirical estimates do not separately identify the underlying parameters. The identification problem can be thought of as an omitted variable bias because no explicit measure of expected future labor market conditions is included. I use state-level data to estimate empirical models in which the underlying parameters are identified. I find that high wages and low unemployment encourage in-migration, but that the omitted variable bias can be large. For example, when I control for future conditions in one model, the strength of the relationship between current wages and net migration is less than half as large. I integrate the migration model into a simple labor supply and demand framework and use my estimates of the migration model to simulate a labor market's response to permanent and transitory demand shocks. In the short run, net migration responds more to permanent shocks and current wages and employment rates respond more to transitory ones.

Keywords: Migration, Local Labor Markets

Full paper (284 KB PDF) | Full paper (279 KB Postscript)

Home | Economic research and data | FR working papers | FEDS | 1999 FEDS papers

To comment on this site, please fill out our feedback form.
Last update: April 16, 1999