UNDERSTANDING THE LONG‐RUN DECLINE IN INTERSTATE MIGRATION

• Author: Sam Schulhofer‐Wohl,Greg Kaplan
• Published date: 01 February 2017
• DOI: http://doi.org/10.1111/iere.12209
• Date: 01 February 2017

INTERNATIONAL ECONOMIC REVIEW

Vol. 58, No. 1, February 2017

UNDERSTANDING THE LONG-RUN DECLINE IN INTERSTATE MIGRATION∗

BYGREG KAPLAN AND SAM SCHULHOFER-WOHL1

University of Chicago and NBER, U.S.A.; Federal Reserve Bank of Chicago, U.S.A.

We analyze the secular decline in gross interstate migration in the United States from 1991 to 2011. We argue that

migration fell because of a decline in the geographic specificity of returns to occupations, together with an increase in

workers’ ability to learn about other locations before moving. Micro data on earnings and occupations across space

provide evidence for lower geographic specificity. Other explanations do not fit the data. A calibrated model formalizes

the geographic specificity and information mechanisms and is consistent with cross-sectional and time-series evidence.

Our mechanisms can explain at least half of the decline in migration.

1. INTRODUCTION

In the early 1990s, about 3% of Americans moved between states each year. Today, that rate

has fallen by half. Micro data rule out many popular explanations for this change, such as aging

of the population or changes in the number of two-earner households. But the data do support

two novel theories. The first theory is that labor markets around the country have become more

similar in the returns they offer to particular skills, so workers need not move to a particular

place to maximize the return on their idiosyncratic abilities. The second theory is that better

information—due to both information technology and falling travel costs—has made locations

less of an experience good, thereby reducing the need for young people to experiment with

living in different places. We build a model that makes these ideas precise and show that a

plausibly calibrated version is consistent with cross-sectional and time-series patterns.

Many policymakers have worried that the decline in migration heralds a less-flexible economy

where workers cannot move to places with good jobs. In such an economy, the labor market

might adjust more slowly to shocks, potentially prolonging recessions and reducing growth.

Low migration has thus been proposed as an explanation for the slow recovery from the 2007–

08 financial crisis (see, e.g., Batini et al., 2010). But the causes of decreased migration that

we identify suggest that the economy may not be less flexible after all. Rather, low migration

means that workers either do not need to move to obtain good jobs or have better information

about their opportunities. In either case, the appropriate policy response may differ from the

appropriate response to a decrease in workers’ ability to move. Thus, understanding the causes

of the decline in gross migration is an important goal for economists.

Figure 1 shows gross and net interstate migration rates over the past six decades. The gross

rate—the fraction of U.S. residents at least one year old who lived in a different state one

year ago—comes from the Annual Social and Economic Supplement to the Current Population

Survey, commonly known as the March CPS. The net rate comes from the Census Bureau’s

annual state population estimates (U.S. Census Bureau, 1999, 2009a). Several key patterns

are immediately apparent. First, net flows are an order of magnitude smaller than gross flows.

∗Manuscript received September 2014; revised June 2015.

1We thank Diego Amador, Chloe Booth, and Yoon Sun Hur for excellent research assistance and Joan Gieseke for

editorial assistance. We also thank numerous seminar and conference participants for helpful comments. This article

was completed while Kaplan was employed at Princeton University and Schulhofer-Wohl was employed at the Federal

Reserve Bank of Minneapolis. The views expressed herein are those of the authors and not necessarily those of the

Federal Reserve Bank of Chicago, the Federal Reserve Bank of Minneapolis, or the Federal Reserve System.

Please address correspondence to: Greg Kaplan, Department of Economics, University of Chicago, Saieh Hall, 5757

S. University Avenue, Chicago, IL 60637. Phone: (773) 702-5079. Fax: (773) 702-8490. E-mail: gkaplan@uchicago.edu.

57

C

(2017) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social

and Economic Research Association

58 KAPLAN AND SCHULHOFER-WOHL

1950 1960 1970 1980 1990 2000 2010

0.00

0.01

0.02

0.03

0.04

CPS gross migration rate

Working-age adults

Net migration rate

SOURCE: U.S. Census Bureau (gross migration rate, 1948–67); authors’ calculations from CPS micro data (gross migration

rate, 1967–2011) and Census Bureau population estimates (net migration rate). The numerator of the net migration

rate is one-half of the sum of absolute values of inflows minus outflows in each state. (This number is the minimum

number of moves that would have to be prevented to set net migration to zero in every state.) The denominator of the

rate between years tand t+1 is the U.S. population at tminus deaths between tand t+1.

FIGURE 1

GROSS AND NET INTERSTATE MIGRATION

Second, although the gross flows exhibit some cyclical fluctuations, these fluctuations are much

smaller than the overall decline over the past 20 years. Third, the trend in gross flows is virtually

identical when we restrict the analysis to a sample of working-age adults in civilian households.

These patterns suggest that to understand the decline in migration, we must look for factors

that affect gross flows instead of net flows; that vary over long time horizons instead of at

business cycle frequencies; and that affect working-age people, instead of only people making

life-cycle-related transitions such as retiring or moving for college.

Two additional patterns guide our focus on information and on workers. Figure 2(a) shows

that even among recent immigrants to the United States, the fraction who move between states

after arriving has fallen over time. This decline is broadly consistent with both theories we

propose. Improved information may make immigrants better able to choose a good initial

destination. Alternatively, if immigrants choose their initial destinations based on family or

ethnic ties (e.g., MacDonald and MacDonald, 1964) and later move to places where their

idiosyncratic job matches are better, then a decline in interstate migration by new immigrants

is consistent with the hypothesis that locations have become more similar in the jobs they offer,

so that there is less reason for immigrants to change their initial locations.

Figure 2(b) examines the dimensions of information that may matter by showing the fraction

of Americans who say they moved between states for various reasons. Job-related reasons—

primarily moves for new jobs or job transfers—have declined sharply, whereas other types of

moves have declined more slowly. Of course, the reasons people give in a survey may not be

their true reasons for moving. However, when a survey respondent says she moved for a new

job, we think it is highly likely that she changed jobs around the time of the move—even if

other factors, such as local amenities, motivated the desire to search for a job in a new location.

Thus, to understand why migration is falling, we need to understand why people have become

less likely to make moves that happen around the same time as job changes. Notably, there has

been little change in the fraction of people who move to look for work or because they lost a

job. Thus, it does not appear that better information has made it easier for workers to find jobs

in faraway places before actually moving there: In that case, we would see an increase in moves

for new jobs and a decrease in the number of people who move to look for work. Nonetheless,

because moves for a new job or job transfer are much more common than moves to look for

work, the ability to search for jobs in remote locations appears to be an important component

of migration decisions.

DECLINE IN INTERSTATE MIGRATION 59

1990 1995 2000 2005 2010

0.00

0.01

0.02

0.03

0.04

0.05

0.06

0.07

Immigrated to U.S. in last 1-4 years

Immigrated to U.S. in last 1-3 years

(a) Migration rates for recent immigrants

1995 2000 2005 2010

0.00

0.01

0.02

Family reasons

New job or job transfer

Lost job or to look for work

Other job-related reasons

Housing reasons

All other reasons

(

b

)

Reasons for moving

SOURCE: Authors’ calculations from CPS micro data. The sample is restricted to working-age adults. Estimates are

shown for all years when variables are available. In Figure 2(a), the sample is further restricted to individuals with

non-imputed data on number of years in the United States, estimates are standardized to the mean age distribution for

new immigrants over the years shown, and thin lines show one standard-error confidence bands around point estimates.

FIGURE 2

KEY PATTERNS IN MIGRATION RATES

The decline in job-related moves suggests that the potential improvements in job opportu-

nities from moving are smaller than they were in the past. However, any decline in the impact

of moving on job opportunities cannot come simply from convergence of mean incomes across

states: Such a change would reduce net migration, not gross migration. Rather, there must be a

change in the importance of the match between a particular worker and a particular location.

In our model, workers choose between two locations and two occupations. Each worker has

different skills in the two occupations, and each occupation is more productive in one location.

Changes in this occupation–location premium, which we call the geographic specicity of occu-

pations,have no effect on net flows but do change gross flows by reducing workers’ need to sort

into the places where their particular skills are most productive.

A decrease in the geographic specificity of occupations cannot be the whole story, however.

If locations offer more similar jobs, workers will be less likely to move for work but more likely

to move for amenity-related reasons, because a smaller difference in amenities is now required

to overcome the difference in earnings. But as Figure 2(b) shows, amenity-related moves have

not risen. Thus, some other factor must also be at play.