Earnings Expectations and the Role of Human Capital in the Migration Decision: An Empirical Analysis

Nguyen Huu Nghiep,Alan M Schlottmann,Henry W Herzog, Jr

doi:10.52324/001c.9929

Abstract

In most theories of migration, economic incentives are considered important determinates of mobility. One such theory, which draws upon the human capital literature, views migration as an investment that inreases the productivity of human resources. On the other hand, an alternative thery views migration as a response to current income differences across space. This study provides an empirical test of the purported superiority of the human capital theory.

Highlights

In most theories of migration, economic incentives are considered im portant determinants of mobility
Panel Study of Income Dynamics (PSID) is a longitudinal data set on individuals, covering the period I968-I977.® Estimates were confined to white-male family heads
With respect to previous migration,an individual who has migrated in the recent past will, in general, have less attachment to the current location than a long-time resident,and better information about alternative locations(resulting in a higher migration propensity, ceteris paribus)

Summary

INTRODUCTION

In most theories of migration, economic incentives are considered im portant determinants of mobility One such theory, which draws upon the human capital literature, views migration as an investment that increases the productivity ofhuman resources. Under this theory,an individual will migrate to some specific location if the difference between the present values of the income streams at that and the current location is both positive and of sufficient magnitude to offset relocation costs. Our initial investigation of the literature on this topic revealed several shortcomings in the manner in which income differentials are determined for tests of the competing hypotheses These shortcomings are discussed within the general context of earnings expecta tions. The theoretical model for this examination is developed in the third section of the paper and is followed by empirical results and conclusions

EARNINGS EXPECTATIONS AND MIGRATION

THE THEORETICAL MODEL

EMPIRICAL RESULTS

Logit Estimates of the Migration Equation

CONCLUSIONS