Differences in Opportunities? Wage, Employment and House‐Price Effects on Migration*
| Published date | 01 December 2012 |
| DOI | http://doi.org/10.1111/j.1468-0084.2011.00682.x |
| Author | Mark P. Taylor,Birgitta Rabe |
| Date | 01 December 2012 |
831
©Blackwell Publishing Ltd and the Department of Economics, University of Oxford 2012. Published by Blackwell Publishing Ltd,
9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.
OXFORD BULLETIN OF ECONOMICS AND STATISTICS, 74, 6 (2012) 0305-9049
doi: 10.1111/j.1468-0084.2011.00682.x
Differences in Opportunities? Wage, Employment and
House-Price Effects on Migration*
Birgitta Rabe and Mark P. Taylor
Institute for Social and Economic Research, University of Essex, Colchester, CO3 4SG, UK
(e-mails: brabe@essex.ac.uk; taylm@essex.ac.uk)
Abstract
Most empirical studies of individual migration choice analyse factors associated with out-
migration from an origin location. In contrast, we model the migration decision within
the context of potential destinations, combining British panel data over the period 1992–
2008 with other data sources. Contrary to earlier micro studies, we show that differ-
ences in house prices levels (but not growth) are important determinants of household
migration for homeowners. Unemployed individuals respond to regional differences in
expected individual wages, whereas the employed are more sensitive to employment
opportunities. Our evidence is consistent with partners of heads of households being tied
migrants.
.
I. Introduction
In this article, we analyse the effects of wages, employment opportunities and house prices
on the inter-regional migration of households in Britain. There is a long-standing interest
in the determinants of migration in Britain given persistent inter-regional differences in
wages, employment rates and prices. Many previous studies have analysed migration flows
in the context of aggregate regional factors, such as wages, unemployment and different
types of amenities, which might make locations more or less attractive (e.g. Pissarides and
McMaster, 1990; Jackman and Savouri, 1992a; Hatton and Tani, 2005). Others have used
microeconomic data to investigate how individual characteristics influence the decision
to migrate (e.g. DaVanzo, 1978; Pissarides and Wadsworth, 1989; Gregg, Machin and
Manning, 2004). Most individual-level studies concentrate on the reasons associated with
out-migration from an origin location.
We make four contributions to this literature: (i) instead of using aggregate data on
regional wage differences, we estimate individual expected wage differentials between
ÅWe thank Stephen Jenkins, Cheti Nicoletti, Steve Pudney and two anonymous referees for their useful com-
ments and suggestions. This work was supported by the Economic and Social Research Council (ESRC) through the
Research Centre on Micro-Social Change (MiSoC) (award no. RES-518-28-001). British Household Panel Survey
data are available from the UK Data Archive (http://www.data-archive.ac.uk)
JEL Classification numbers: R23, J61.
832 Bulletin
origin and destination location and use them to explain the migration choice1; (ii) we model
the migration decision within the context of potential destinations rather than focusing only
on origin characteristics; (iii) we model the migration choice at the household level, look-
ing at the wage and employment opportunities of both spouses within a couple; and (iv) we
examine how different groups of individuals respond to regional house price and expected
earnings differentials. We define these groups in terms of both pre- and post-migration
characteristics.
We argue that by explicitly investigating how regional differences in individual wages,
employment opportunities and stability, and house prices influence the migration decision,
we gain new insights and offer new interpretations to existing results. In particular, and
contrary to most previous microeconomic studies, our analysis confirms the importance
of house price differentials for the migration choice found in aggregate analyses – high
house prices in potential destinations deters migration among homeowners. We also find
that expected wage differentials are an important incentive for migration among the un-
employed while differences in job stability are important for the employed. Therefore, the
economic incentives for migration differ by the employment status of potential migrants.
II. Wages, employment opportunities and house prices
The human capital approach to migration assumes that individuals are influenced in the
migration choice by the income they expect to receive at alternative locations (Sjaastad,
1962). Productivity of different skills, levels of education or age groups may vary between
regions, for example, because of differences in natural resources or varying production
technologies of local employers. This results in regional-specific returns to an individual’s
human capital. The values of alternative wage rates, as well as the corresponding probabil-
ities of getting (or retaining) those wage rates will enter the migration decision. Migration
is likely to depend on nominal wage differences, but also on differences in labour market
tightness (which affects the probability of getting a job) and job stability (which affects
the probability of retaining a job and hence the lifetime earnings profile). Furthermore,
the real values of wage rates will be related to regional price levels, in particular housing
costs, which typically make up the bulk of living costs.
Aggregate studies of inter-regional migration in Britain have mostly confirmed the
expected effects on migration of differences in unemployment, house prices and wages
(Pissarides and McMaster, 1990; Jackman and Savouri, 1992a; Cameron and Muellbauer,
1998; Hatton and Tani, 2005; Murphy, Muellbauer and Cameron, 2006). They have also
shown that because of the possibility of commuting, wage differentials are less impor-
tant for migration into contiguous regions, where housing considerations tend to dominate
(Jackman and Savouri, 1992b; Cameron and Muellbauer, 1998). Wagedifferentials are also
less important for older workers who benefit from the returns to migration for a shorter time.
The literature has shown that the South East of England plays a unique role in migration
behaviour which has evolved over time. For example, in the late 1980s, house price growth
was particularly buoyant in the South East, and the expectation of house price apprecia-
tion led to considerable in-migration. The South East also served as ‘escalator region’ that
1Other contributions which incorporate regional wage estimates into the analysis of migration determinants, include
DaVanzo (1978), Enchautegui (1997), Jacobsen and Levin (2000) and Dahl (2002).
©Blackwell Publishing Ltd and the Department of Economics, University of Oxford 2012
To continue reading
Request your trial