When Distance Drives Destination, Towns Can Stimulate Development

In most of the developing world, individual wealth tends to increase with city size, making migration an important avenue for poverty reduction. Moves to big cities are, on average, much more lucrative than moves to small towns. Even so, survey data show that few people make it to the cities and many more migrants end up with more modest income gains realised through moves to smaller towns. This raises some key questions: how do migrants choose their destinations, and why do they move to seemingly sub-optimal locations?

In a recent paper, LML External Fellow Ravi Kanbur and colleagues explore these questions. As they note, one possibility is that other factors such as differences in health, public goods, crime or pollution might serve to compensate for lower wealth, and draw people to smaller towns. Studies find, however, that across a range of non-monetary amenities, practically every measure improves with population density. This has led researchers to suspect that a decisive factor may be that costs and difficulties involved in migration increase with physical distance, encouraging many people to migrate only to relatively close but smaller towns. Indeed, a great deal of recent migration literature emphasizes how younger, better educated and richer people are more likely to move as they are better equipped to overcome migration costs.

Kanbur and colleagues use household survey and census data from Tanzania to examine in more detail why many more migrants move to seemingly sub-optimal towns. They use a data set on migrants which includes pre-migration and post-migration survey information. In the early 1990’s, respondents all lived in Kagera, a large, remote and primarily rural region in the north-western part of Tanzania. By 2010, about half of those who were still alive had moved out to other villages, towns or cities. The authors use the pre-migration survey data to create a dyadic dataset of all possible migrant-destination pairs, each migrant choosing precisely one destination. Analysing the data using a basic model for optimal behaviour, including both gains in income and costs associated with migration over a distance, they find that migrants generally choose destinations which are closer and have higher local living standards, and that distance is by a large margin the most important determinant. Expected wages would need to go up by 5.7 standard deviations to offset a 1 standard deviation increase in distance.

Broadly interpreted, the authors suggest, these results support calls for balanced territorial development policies and plans that strengthen the role of small and intermediate cities and towns in development policy and interventions.

The paper is available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3798910

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