Econometrica, Vol. 79, No. 1 (January, 2011), 211–251


BY JOHN KENNAN AND JAMES R. WALKER

This paper develops a tractable econometric model of optimal migration, focusing
on expected income as the main economic influence on migration. The model improves
on previous work in two respects: it covers optimal sequences of location decisions
(rather than a single once-for-all choice) and it allows for many alternative location
choices. The model is estimated using panel data from the National Longitudinal Survey
of Youth on white males with a high-school education. Our main conclusion is
that interstate migration decisions are influenced to a substantial extent by income
prospects. The results suggest that the link between income and migration decisions
is driven both by geographic differences in mean wages and by a tendency to move in
search of a better locational match when the income realization in the current location
is unfavorable.

KEYWORDS: Migration, dynamic discrete choice models, job search, human capital.