Migration with Costly Information

Abstract

Information is critical for migration decisions, but individuals may face different costs of accessing information, depending, for example, on where they reside and who they interact with. How do these costs shape migration decisions, and ultimately the geography of opportunities? To investigate this question, I develop a quantitative dynamic model of migration with costly information acquisition and local information sharing. Although agents are rationally inattentive, migration flows preserve a tractable logit structure. Information frictions affect both the magnitude and the responsiveness of migration flows to variations in local opportunities. I estimate the parameters of my model from Brazilian internal migration flows between 137 regions. Deciding where to go appears to be as costly as moving, with annualized average costs of information and migration both equal to 3% of earnings. My model successfully predicts the observed heterogeneous migration elasticities and delayed migration responses to local shocks. To illustrate its quantitative implications, I evaluate the counterfactual effect of the roll-out of broadband internet in Brazil. By allowing workers to make better mobility choices, expanding internet access increases average welfare by 1.6%, reduces migration flows by 1.2% and reduces the cross-sectional dispersion in earnings by 4%.