It’s not me, it’s you: internal migration and local wages in Great Britain

ABSTRACT

Differences in regional incomes are large and persistent in many countries. On the one hand, internal migration from low- to high-income regions might eradicate these differences over time. On the other hand, internal migration might exacerbate disparities, as receiving regions benefit from incoming skills and agglomeration economies. This paper estimates the effect of internal in- and out-migration on the earnings of employees who do not move, using a panel of employee records from Great Britain between 2004 and 2018. Employees are tracked and identified as internal migrants if they start working in a new travel-to-work area (TTWA), representing functional labour market areas. The share of in- and out-migrants is significantly correlated with earnings and earnings growth of non-migrants in a TTWA. The results show that in-migrants have an immediate negative effect on local earnings of non-migrants. After three years, in-migration is positively correlated with earnings growth. These effects are exclusively driven by urban areas. Out-migrants have no significant effects. The results provide some evidence that labour mobility can be used as a tool to encourage local growth, albeit with significant adjustment costs.

KEYWORDS:

• Internal migration
• labour mobility
• income
• earnings
• labour markets
• employment

JEL CODES:

• D31
• R11
• R23

ACKNOWLEDGEMENTS

The author is grateful to Simona Iammarino, Michael Storper, Alessandra Faggian and Vassilis Monastiriotis, the editor and two anonymous referees for detailed comments and suggestions, as well as participants at the LSE Economic Geography Work in Progress seminars, the Global Conference in Economic Geography 2018, the Regional Studies Association Early Career Conference 2018, the Royal Geographic Society Postgraduate Forum mid-term conference 2019, the Seminars in Economic Geography 2020 and the City-REDI Research Symposium 2021.

DATA AVAILABILITY STATEMENT

This work contains statistical data from ONS which is Crown Copyright. The use of the ONS statistical data in this work does not imply the endorsement of the ONS in relation to the interpretation or analysis of the statistical data. This work uses research datasets which may not exactly reproduce National Statistics aggregates. Some of the statistical data used in this study were accessed in a secure research environment under the Digital Economy Act 2017 and cannot be made available by the author due to data protection regulations. The work was carried out in the Secure Research Service, part of the Office for National Statistics.

DISCLOSURE STATEMENT

No potential conflict of interest was reported by the author(s).

Notes

1 It was noted during peer review that the female dummy should not have been included in the regression with individual fixed effects. The coefficient is identified from a small number of observations that are recorded as changing gender in the data. Unfortunately, due to restrictions on data access, it was not possible to update these results.

Additional information

Funding

This work was supported by the Economic and Social Research Council under Grant number 1953948.