Department of Economics Seminar Series – Melanie Morten

“Migration, Roads and Labor Market Integration: Evidence from a Planned Capital City” Abstract: Wages in developing countries differ greatly across sector and across space. In Brazil, real wages are on average 41% higher in the capital city, Brasilia, than outside the capital. The wage gap remains large even within skill group (31%) and within industry (22%). These large differences in returns to labor present a spatial arbitrage puzzle: why do people not migrate to equalize wages across space? We propose one explanation: it is costly to move. We use the construction of a planned capital city, Brasilia, to generate plausibly exogenous variation in the national road network, and examine the role of roads in facilitating labor market integration. Using a database of gross inter-municipality flows, we construct and estimate a spatial equilibrium model where migration is costly. The results yield that access to roads is a key determinant of migration. Reducing the marginal cost of traveling by 50% would increase migration rates to 16%, from a base of 8.7%. The effect is reduced by 10% once the general equilibrium effects of migration are computed.

Location:

SS 423

Speaker:

Melanie Morten, Stanford University & Federal Reserve Bank of Minneapolis

More information at http://www.ucalgary.ca/events/calendar/department-economics-seminar-series-melanie-morten