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To stay or to migrate? When Becker meets Harris-Todaro

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  • Wang, Yin-Chi
  • Liao, Pei-Ju
  • Wang, Ping
  • Yip, Chong Kee

Abstract

Allowing migration as an integral part of demographic transition and economic development, we construct a dynamic competitive migration equilibrium framework with rural agents heterogeneous in skills and fertility preferences to establish a location-fertility trade-off and explore its macroeconomic consequences. We characterize a mixed migration equilibrium where an endogenously determined fraction of high-skilled agents with high fertility preferences or low-skilled agents with low fertility preferences ultimately moves. By calibrating the model to fit the data from China, whose migration and population control policies offer a rich array of issues for quantitative investigation, we find strong interactions between migration and fertility decisions – the location-fertility trade-off – and rich interplay between the joint responses of these choices to changes in migration and population control policies. Our results indicate that both output per capita and urbanization rates are more responsive than Total Fertility Rate (TFR) to migration and population policies: A one-percent decrease in TFR corresponds to an over one-percent increase in output per capita and a more than two-percent rise in urbanization rates. Overlooking the location-fertility trade-off may thus lead to nonnegligible biases in assessing the implications and effectiveness of government policies.

Suggested Citation

  • Wang, Yin-Chi & Liao, Pei-Ju & Wang, Ping & Yip, Chong Kee, 2024. "To stay or to migrate? When Becker meets Harris-Todaro," European Economic Review, Elsevier, vol. 169(C).
    • Handle: RePEc:eee:eecrev:v:169:y:2024:i:c:s0014292124001600
    DOI: 10.1016/j.euroecorev.2024.104831
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    Cited by:

    1. Pei-Ju Liao & Ping Wang & Yin-Chi Wang & Chong K. Yip, 2020. "Fertility and Internal Migration," Review, Federal Reserve Bank of St. Louis, vol. 102(4), pages 429-445, October.
    2. Fried, Stephie & Lagakos, David, 2021. "Rural electrification, migration and structural transformation: Evidence from Ethiopia," Regional Science and Urban Economics, Elsevier, vol. 91(C).
    3. Garriga, Carlos & Hedlund, Aaron & Tang, Yang & Wang, Ping, 2021. "Rural-urban migration and house prices in China," Regional Science and Urban Economics, Elsevier, vol. 91(C).
    4. William R. Emmons & Jacob Haas & Christopher J. Neely, 2020. "Responses of International Central Banks to the COVID-19 Crisis," Review, Federal Reserve Bank of St. Louis, vol. 102(4), pages 338-384, October.
    5. Navarro, Salvador & Zhou, Jin, 2024. "Human capital and migration: A cautionary tale," Journal of Econometrics, Elsevier, vol. 243(1).

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    More about this item

    Keywords

    Rural-urban migration; Fertility; Urbanization; Development;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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