Research

Using the Kilts Nielsen Consumer Panel (KNCP), this paper documents novel empirical findings on expenditure and income growth upon migration. First, movers' KNCP expenditures relative to non-movers' decline by 6% during a year before the move, and then increase by 9% during a year after the move. Thus, there is a 3% net increase in relative expenditures from a year before to a year after the move. This net change in movers' relative expenditures is consistent with that in movers' relative earnings, which I estimate to increase by 3% over the same 2-year window around the move time. The V-shaped pattern in movers' relative expenditures departs from predictions of the standard permanent income hypothesis (PIH), which many migration models in the literature implicitly assume. If movers can expect an income increase after moving, the PIH predicts movers to raise their spending upon deciding to move, not subsequently. I see similar spending responses to moving for non-storable foods, implying that the V-shaped response does not reflect moving households' dissipating then accumulating inventories. Next, I document that movers' income growth displays higher variance than non-movers', both before and after moving. Movers' expenditure growth also exhibits higher variance than non-movers before and after the move. These findings suggest that movers have higher precautionary savings motives than non-movers. Hence I explore whether a model beyond the standard PIH--featuring precautionary savings motives and a borrowing constraint--is consistent with the documented data moments. Qualitatively, the model can explain both the pre-move decline and post-move increase in movers' relative expenditures. Quantitatively, the simulated results show that precautionary savings from income risk can explain 40% of the average post-move consumption growth of movers.

Migration is associated with wage increases on average, presumably reflecting a higher valuation of the workers' skills in their new locations. In terms of permanent income, however, this income gain from moving should be larger for workers whose skills and wages would grow faster regardless of their locations. Therefore, workers expecting higher worker-specific wage growth associated with additional work experience, i.e., returns to experience, have a greater incentive to move for higher wages, all else equal. This paper explores this channel of expected returns to experience for migration decisions using the Survey of Income and Program Participation (SIPP). I construct a measure of household-specific rates of return to experience, assuming variations in the returns reflect heads' education attainments and calendar times of migration decisions. My estimates show that expected rates of returns to experience significantly increase the likelihood of intrastate migration. Given that this channel is intertemporal, I show suggestive evidence that a borrowing constraint may reduce its impact.