Breaking out of poverty traps: Internal migration and interregional convergence in Russia

We study barriers to labor mobility using panel data on gross region-to-region migration flows in Russia in 1996-2010. Using both parametric and semiparametric methods and controlling for region-to-region pairwise fixed effects, we find a non-monotonic relationship between income and migration. In richer regions, higher incomes result in lower migration outflows. However, in the poorest regions, an increase in incomes results in higher emigration. This is consistent with the presence of geographical poverty traps: potential migrants want to leave the poor regions but cannot afford to move. We also show that economic growth and financial development have allowed most Russian regions to grow out of poverty traps bringing down interregional differentials of wages, incomes and unemployment rates.