The Untapped Potential of Migration: Understanding the Barriers and Benefits

Moving either within or between countries is often part of a life change that triggers substantially better outcomes.

Take a half-step back from the current disputes in the US and the European Union about recent surges of migration, and consider the topic more broadly. David McKenzie has written “Fears and Tears: Should More People Be Moving within and from Developing Countries, and What Stops this Movement?” (World Bank Research Observer, February 2024, 39:1, pp. 75-96). As context, McKenzie writes:

The United Nations estimates that there were 272 million international migrants in 2019. While this might seem like a large number, it is only 3.5 percent of the global population. Emigration rates are lower still for the regions with the poorest people: emigrants are only 2.5 percent of the population of sub-Saharan Africa and 2.2 percent of the population of South Asia (World Bank 2016). Rates are much higher for small island states, with more than 40 percent of Jamaicans, Tongans, and Samoans living abroad. But even in these very small, isolated countries, many people do not move. Internal migration rates are much higher. Data on what constitutes an internal move is hard to compare exactly across countries, but the United Nations (2013) estimates that there are 763 million persons living within their own country but outside their region of birth. Combining this with the international migration data leads to a rough estimate that approximately one billion people, or one in seven of the world’s population have ever migrated.

Although McKenzie is focused on the global picture, it’s perhaps worth noting that movement within the United States has been on a gradually downward trend, as well. The reasons are not clear, because the trend of downward mobility is so wide that it affects all groups: homeowners and non-homeowners, the elderly and the non-elderly, higher and lower incomes, and so on. But the downward trend seems pretty clear, as I discuss (for example) here and here.

In my own life, I’ve moved across regions of the United States twice as a child, and then five times as an adult. Among the readership of this blog, I suspect that multiple long-distance moves are not at all unusual. But it’s quite different from the experience of most Americans and most people around the world.

As you might imagine, there’s active research in this area, and McKenzie offers a crisp overview of the evidence. Can the gains from moving be explained by observable factors like education level or age? (No.) Can the gains from moving be explained by unobservable factors like personality traits including persistence? (Harder to say, but probably not.) Can the seemingly low level of moving, given these gains, be explained by factors like costs of moving, quotas that limit movement, pessimistic estimates of potential benefits from moving, short-run time horizons that see only the immediate costs of moving, but not the longer-term benefits? (All of these factors seem real, but the gains from moving are so large that these factors don’t seem like enough to explain the lack of moving that occurs.)

The existing research seems to leave a puzzle: the explanations for a lack of moving aren’t powerful enough. Additional reasons for the lack of moving are needed. Here, McKenzie suggests two possibilities, which he calls “fears” and “tears.”

In the discussion of “fears,” McKenzie writes:

I think economists have devoted far less attention to what I call fears, which is the enormous uncertainty associated with migration that is difficult to quantify. This type of unquantifiable uncertainty, also known as Knightian uncertainty, may include fears about the safety conditions at destination (Shrestha 2020 finds Nepalese migrants overestimate the risks of death), the ability to make friends and fit in, about whether one will like living in the new location, and soon. With Knightian uncertainty, there is no unique probability distribution of possible outcomes of employment, wages, and amenities, and so individuals cannot make decisions by just choosing the action that maximizes expected utility. Bewley(2002) argues that in such cases, there can be a bias towards inertia. A decision-maker may remain with the status quo unless one alternative dominates another under all possible probability distributions. This can create a bias towards immobility, since individuals will only move if doing so is better under all possible probability distributions. This may also explain why we see less migration in the aggregate than an expected cost-benefit calculation would suggest, since individuals do not know if they personally will be the ones benefiting from movement, even if on average across the full range of possible distributions the aggregate benefits are positive.

By “tears,” McKenzie is referring to the emotional shock that many of us feel when leaving one place and moving to another. He describes the underlying dynamic in this way:

I think a bigger part of the reason for tears upon moving and not having these same tears upon deciding to stay is the inability to picture what you are giving up when you do not move. It is easy to visualize that moving entails losses from not being able to meet up with your current friends, go to your current favorite restaurants, or enjoy your current favorite running trails. But it is much harder to visualize the losses that not migrating brings: the friends in the new place that you will never meet if you do not move, the experiences of a brand new environment that you will never get to appreciate, and soon. Gabaix and Laibson (2017) argue that people have only noisy information about the future and that it is harder to forecast the further into the future one looks, with these features causing individuals to behave as if they have very myopic preferences, preferring the present. A similar idea might apply when considering the signals individuals have about utility indifferent locations—they will have much more precise signals about their utility in their current location than in alternative locations which could result in a preference for not moving. Studies of how consumers make purchase decisions have discussed the possibility of opportunity cost neglect, whereby they sometimes fail to recognize what they are giving up by choosing one purchase over another (Frederick et al. 2009). It may be particularly easy to neglect the opportunity cost of not moving when what is being given up is hard to picture.

I might try to summarize these issues with the idea that some people are raised with (or even born with?) the idea that large movements at various junctures of life, education, and jobs are to be expected. But for many others, the idea of a big move requires a substantial and willful act to muster a sense of positive imagination about how a long-distance move can improve your life.