Regional Convergence and The Causal Impact of Migration on Regional Growth Rates

The standard growth theory predicts that allowing for labor mobility across regions would increase the speed of convergence in per capita income levels and that migration has a negative causal impact on regional growth rates. Although the empirical literature has uncovered some evidence for the former implication, the latter has not been verified empirically. This paper provides empirical evidence for the negative causal impact of migration on provincial growth rates in a developing country with a high level of internal migration that is characterized by unskilled labor exiting rural areas for urban centers. We utilize instrumental variables estimation method with an instrument unique to the country examined and also control for provincial fixed effects.Regional convergence; Regional growth; Internal migration; Fixed effects; IV estimation