Real Earnings and Human Migration

Abstract

The theory of human migration based on the concept of individual costs and returns from relocation has succeeded in identifying the more important factors affecting an individual's decision to move. However, while the theoretical models indicate the importance of a real earnings variable, empirical models have only considered some form of a nominal earnings variable. This article, then, outlines the analytical framework of a costs and returns approach to migration, utilizes a real earnings concept as an integral part of such a theory, subjects the resulting model to empirical test by means of regression analysis, and compares the real wage model with a nominal wage model. To accomplish this and conform as closely as possible to the theory, it was necessary to develop a method for deriving an inter-regional nominal earnings deflator from existing data to obtain real wages.