MIGRATION WITH IMPERFECT INFORMATION: A THEORETICAL AND EMPIRICAL STUDY OF INDIVIDUAL DECISIONMAKING (POPULATION, REGIONAL ECONOMICS)

This dissertation is a theoretical and empirical investigation of the individual\u27s migration decision. It focuses on the role of imperfect information, individual differences in risk aversion, and local labor market characteristics in the individual\u27s decision to move from or stay at a location. The individual\u27s migration decision is modeled as the outcome of a comparison of the expected utility at an alternative market to the utility at an origin market. Imperfect information is modeled by restricting the information held by individuals first to their own current market wage, and second to their own wage plus some additional information on the source of their wage level as being local or national. Individuals are assumed to form rational expectations about the alternative market wage level given their information, knowledge of location-specific amenities, and uncertainty about employment opportunities. A decomposition of wages into market specific and economy-wide sources of variation is used to illustrate the effect of market differences on migration decisions. The distance between markets is hypothesized to affect the value of the individual\u27s information and hence the likelihood of a move because markets that are geographically proximate may have economies similar to those in which the individual currently resides. A random coefficient specification of a move or stay model of migration is used to test the contribution of the origin market, as it influences the decision through the distribution of wages and amenities, and individual differences in risk aversion. The data is a sample of employed males from the 1979-1980 National Longitudinal Survey of Youths. Results suggest that models which do not explicitly account for risk aversion may be misspecified. Also, the location specific effects which act through amentities and the distribution of wages have significant effects on the probability of migration. The main policy implication of this research is that income and unemployment place targeting policies may not stem out-migration from a declining market