DP16469 Testing Classic Theories of Migration in the Lab

Author(s): Catia Batista, David J. McKenzie
Publication Date: August 2021
Keyword(s): Destination Choice, IIA property, Lab Experiment, migrant selection
JEL(s): C91, F22, O15
Programme Areas: Development Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16469

We test the predictions of different classic migration theories by using incentivized laboratory experiments to investigate how potential migrants decide between working in different destinations. We test theories of income maximization, migrant skill-selection, and multi-destination choice as we vary migration costs, liquidity constraints, risk, social benefits, and incomplete information. We show the standard income maximization model of migration with selection on observed and unobserved skills leads to a much higher migration rate and more negative skill-selection than is obtained when migration decisions take place under more realistic assumptions. Second, we investigate whether the independence of irrelevant alternatives (IIA) assumption holds. We find it holds for most people when decisions just involve wages, costs, and liquidity constraints. However, once we add a risk of unemployment and incomplete information, IIA no longer holds for about 20 percent of our sample.