The Welfare Effects of Encouraging Rural–Urban Migration
David Lagakos, Ahmed Mushfiq Mobarak, Michael E. Waugh
Econometrica · 2023 · Volume 91 · Issue 3
Abstract
This paper studies the welfare effects of encouraging rural–urban migration in the developing world. To do so, we build and analyze a dynamic general-equilibrium model of migration that features a rich set of migration motives. We estimate the model to replicate the results of a field experiment that subsidized seasonal migration in rural Bangladesh, leading to significant increases in migration and consumption. We show that the welfare gains from migration subsidies come from providing better insurance for vulnerable rural households rather than from correcting spatial misallocation by relaxing credit constraints for those with high productivity in urban areas that are stuck in rural areas.
Keywords
Rural–urban migration, migration subsidies, spatial misallocation
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