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Abstract The large income gap between urban and rural parts of many poor countries invites the question of why migration does not arbitrage this gap away. Using a sample of households in rural Kenya, I show that individuals on average underestimate urban wages considerably. Randomizing the provision of city-level labor market information to 464 households causes them to update their beliefs about the returns to migration and increases the rate of migration to Nairobi. Treated households earn more income and express a greater desire to send another migrant to Nairobi in the future. To understand how downward-biased beliefs can persist, I collect data on perceptions of migrant earnings from residents of origin villages and match them with data on actual migrant earnings. The data are consistent with strategic income misreporting by migrants: when migrants have a greater incentive to hide income from an origin resident, the origin resident underestimates the migrant's income to a greater degree, and reports a lower belief about his or her own potential return to migration. Finally, I experimentally shock rural individuals' beliefs about migrant earnings and show that this translates into higher beliefs about the returns to migration. Together, these results demonstrate that urban-rural information asymmetries can distort the migration decision and suppress migration to high-wage cities. Urban workers in Kenya earn twice as much as rural workers with the same level of education. Why don't more rural workers migrate to cities? I use two field experiments to show that low migration is partly due to underestimation of urban incomes, and that this inaccurate information can be sustained by migrants' strategic motives to hide income to minimize remittance obligations. Parents underestimate their migrant children's incomes by nearly half, and underestimation is greater when a migrant's incentive to hide income is higher. Providing information about urban earnings increases migration to the capital city by 33% over two years.
Last Published October 10, 2018 08:45 PM February 24, 2020 05:18 PM
Primary Outcomes (End Points) Intervention 1: Beliefs about the returns to migration, probability of migrating within the year following the intervention, income, self-reported welfare. Intervention 2: Beliefs about average earnings in Nairobi (unconditional and for migrants), beliefs about the returns to migration, likelihood of migrating within the next year. Intervention 1: Beliefs about the returns to migration, probability of migrating within the year following the intervention, employment, income, self-reported welfare. Intervention 2: Beliefs about average earnings in Nairobi (unconditional and for migrants), beliefs about the returns to migration, likelihood of migrating within the next year.
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