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Mover stayer winner loser

A study of income effects from rural migration

Bjerke, Lina / Mellander, Charlotta

Abstract Rural-urban migration theory suggests that one gains economically by moving from a rural to an urban area. The popular juxtaposing notion is: “If you stay, you lose.” But given the rapid increase in housing costs in bigger cities, are losses from staying in rural areas still necessarily the rule? If so, how big is the economic loss for those who stay in rural regions? Using Swedish micro data, we focus on the income effects of rural-urban migration among young individuals. We find that staying in a rural region is negatively related to an individual's income levels, but the loss is mostly insignificant. After controlling for housing costs, it is even beneficial for many people to stay in their rural areas, except for the most highly educated individuals who can benefit by moving to an urban area.

Highlights • Rural-urban migration theory suggest one gains by moving from a rural to an urban area, but we find this is not always true. • Rural areas can potentially compensate their lower work incomes with lower housing costs. The role and magnitude of this differential seems to vary with the economic nature of region, specifically its industry structure. • For the approximately 30 percent who start off in a rural area and earn a university degree by the age of 30, moving to an urban area is a better financial choice – even when the higher housing costs are considered. Among the remaining 70 % of individuals, it may be wiser to remain in a rural location. • Overall, cities may very well still be the land of opportunity for high-skilled workers but seem to be far less so for those without a university degree in hand.