Migration Frictions, Earnings Differentials, and Spatial Misallocation: Evidence from Thailand

Ashish Shenoy
Published in
Journal of Southeast Asian Economies
Publication Date

Abstract: This paper uses revealed-preference location decisions of workers in Thailand to quantify the disutility of labor migration, characterize the migration contribution to labor supply elasticity, and estimate the effect of migration frictions on spatial earnings differentials and labor misallocation. I estimate a spatial equilibrium model using commodity prices as instruments for local earnings to overcome endogeneity and selection, and to identify the NPV returns to potential migration. Estimation employs a novel strategy to accommodate measurement error and choice-based sampling. I find migration contributes 9.5 percentage points to local labor supply elasticity. The disutility from migration is 1.0–1.2 times annual earnings; alleviating this friction would induce a quarter of the population to relocate and would lower spatial earnings variation by 20%. However, gains would be realized primarily in non-wage utility with a modest 3% increase in national product, suggesting migration frictions play a limited role in productive misallocation.


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