Research notes · Migration

If cities pay so much more, why do so few people move to them?

What the authors found

Baseler runs two field experiments in Kenya and finds part of the answer is that rural households do not know how much migrants earn. Parents underestimate their own migrant children's incomes by nearly half, and the underestimation is larger where remittance obligations are heavier — migrants hide income precisely to limit what they are asked to send. Giving people accurate information about urban earnings increases migration to the capital.

What our data adds

Income hiding, if it is general, means recorded remittances understate what migrants earn and possibly what they send. The recorded figures are already large: India receives 150.7 billion dollars a year, Mexico 64.4 billion, the Philippines 41.6 billion. As a share of the receiving economy, Tajikistan is at 57.7 per cent of GDP, Honduras 30.1 and El Salvador 27.5. If the mechanism Baseler documents in Kenyan families operates at all widely, these already-large numbers sit below the true flow by an unknown margin.

What this cannot show

The paper is about information within families and this is a national aggregate — the two connect only by an assumption the paper does not make and this note should not smuggle in. Balance of payments remittance figures miss informal channels for reasons of measurement rather than concealment, which is a different mechanism from the one studied. Nothing here can measure hidden income; the note records that a well-identified microeconomic finding has an implication for how a macro series should be read.

The data behind it

Related notes

• If you shut a border to protect domestic workers, do their wages actually rise?
• When seven million people arrive at once, who gains and who loses?
• If firms cannot hire foreign workers for low-skill jobs, do they hire local ones instead?

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