Abstract
Rural to urban migration is an integral part of the development process, but there is little evidence on how out-migration transforms rural labor markets. Emigration could benefit landless village residents by reducing labor competition, or conversely, reduce productivity if skilled workers leave. To study this, we offer to subsidize transport costs for 5,792 potential seasonal migrants in Bangladesh, randomly varying saturation of offers across 133 villages. The transport subsidies increase beneficiaries’ income due to better employment opportunities in the city, and also generate the following spillovers: (a) A higher density of offers increases the individual take-up rate, and induces those connected to offered recipients to also migrate. (b) This increases the male agricultural wage rate in the village, and the available work hours in the village, which combine to increase income earned in the village, (c) There is no intra-household substitution in labor supply, but primary workers within households earn more during weeks in which many of their village co-residents moved away. (d) The wage bill for agricultural employers increases, which reduces their profit, with no significant change in yield. (e) Food prices increase driven by an increase in the price of (fish) protein, and offset by (f) a decrease in the price of non-tradables like prepared food and tea. Seasonal migration subsidies not only generate large direct benefits, but also indirect spillover benefits by creating slack in the village-of-origin labor market during the lean season.