Migration: An alternative approach using utility maximization hypothesis

The thesis of this work is that migration is a consumption activity undertaken by households to generate utility. The need for a better understanding of the economics of migration is evident from the serious inconsistencies existing between current theories and much of the empirical evidence, and from the poor performance of many human capital models in empirical tests.; This work argues that migration is more productively modeled as a utility maximization decision for the household, i.e., the household views the decision to move as a choice among various location-specific consumption bundles, each of which contains a specific set of location-dependent goods and services, including such items as climate, areal amenities, lifestyle opportunities, educational quality, proximity to relatives, etc. It is possible to include in such bundles the location-specific investment return--that is, the net present value of future earnings--that is associated with a particular decision to move.; A model of the household's consumption behavior therefore is constructed to include explicitly the migration decision. The model then is analyzed within a comparative statics framework to identify the sufficient and/or necessary conditions for migration.; The principal extensions of this paper result from the search for an instrument capable of measuring changes in utility levels in a way that is consistent with any and all preferences, i.e., with all forms of utility functions, and which requires only data on observed behavior. The approach taken is the construction of an ad hoc "Location-Specific Utility Index", the component variables of which are intended to serve as proxies for the arguments in households' utility functions. The approach is distinctive in that the index measures only the direction of the change in a household's utility level due to its migration. The ordinal nature of utility rankings thus is not violated through aggregation over households or cross-sectional comparisons of utility levels.; The thesis that migration is appropriately modeled as utility-generating behavior then is subjected to empirical analysis. Longitudinal microdata from the Panel Study of Income Dynamics are used to compute the value of the Location-Specific Utility Index for a large number of households at two points in time, and to calculate the direction of change in their individual utility levels. The results then are compared with the households' migration decisions during the period covered. The results of this analysis support the thesis.