On the dynamics of interstate migration: Migration costs and self-selection

This paper develops a dynamic structural model of migration decisions that is aggregated to describe the behavior of interregional migration. Our structural approach allows us to deal with dynamic self-selection problems that arise from the endogeneity of location choice and the persistence of migration incentives. The self-selection problem is solved by keeping track of the distribution of migration incentives over time. This econometric treatment has important consequences for the estimation of structural parameters such as migration costs. For US interstate migration, we obtain a cost estimate of roughly two-thirds of an average annual household income. We also show that the treatment of income persistence has important consequences for comparative statics of the model as well as microeconomic age patterns of migration.

► We model interregional migration in a structural model.
► Our approach highlights the role of dynamics in migration incentives.
► It allows us to deal with dynamic self-selection resulting from incentive dynamics.
► This has important consequences for the estimation of structural parameters.
► How to model dynamics governs micropatterns of migration and comparative statics.