Internal Migration and its Impact on Reducing Inter-communal Disparities in Chile

1. Chair of Development Economics -- University of Goettingen Internal Migration and its Impact on ReducingInter-communal Disparities in Chile Carlos Villalobos Barría (University of Goettingen) Migration, Development, and Demographic Change – Problems, Consequences, Solutions” June 25 – 28, 2013, University of Antwerp, Belgium Arnoldshain S 2013 Antwerp, Belgien – Villalobos Barría – Internal Migration in Chile

2. Outline • Motivation • Inter-communal migration in Chile • Who are the migrant workers? • Methodological difficulties • Population of interest • Three steps estimation procedure • Dependence on the family • Results • The story • Further discussion Arnoldshain S 2013 Antwerp, Belgien – Villalobos Barría – Internal Migration in Chile

3. Motivation • Why Internal migration in Chile has become less relevant as equalization mechanism during the past decades? Soto and Torche (2004), Busso (2006), CuervoGonzález (2003) and Aroca (2004). • What are the factors discouraging a functional labour mobility making it less able to reduce the earnings-gap across the territory? Arnoldshain S 2013 Antwerp, Belgien – Villalobos Barría – Internal Migration in Chile

4. Inter-Communal Migration • From 2002 to 2006, migration from Rural towards Urban , (threshold set at 40,000 inhabitants) represented less than 4% of the population of origin (approximately 130.000 inhabitants) • A similar flow is moving from Urban to Rural municipalities representing 1.1% of the population of origin • About 21% of the population lives in Rural municipalities • About 79% of the population lives in Urban municipalities • Share of population: Stable over the last decade. Arnoldshain S 2013 Antwerp, Belgien – Villalobos Barría – Internal Migration in Chile

5. Who are the Migrant Workers? Arnoldshain S 2013 Antwerp, Belgien – Villalobos Barría – Internal Migration in Chile

6. Who are the Migrant Workers? • Significant rural-urban earnings-gap! it supports the main hypothesis of this study • Rural movers are younger, less experienced, more educated. They belong to relatively more educated families with a non-indigenous background Arnoldshain S 2013 Antwerp, Belgien – Villalobos Barría – Internal Migration in Chile

7. Methodological Difficulties • Threshold for rural/urban municipalities • Similar approach by Coeymans (1983) and Raczynsky (1980) • Another threshold set at 20,000 inhabitants • Self-Selection of Migrants • The determinants of the employment self-selection are highly correlated to the determinants of the migration status Strategy 1: Focus on migrant workers Strategy 2: Allow for unemployment and compare • Migrant workers are not randomly selected at origin. (Rural or Urban municipalities) Strategy: Three steps estimation procedure Arnoldshain S 2013 Antwerp, Belgien – Villalobos Barría – Internal Migration in Chile

8. Population of Interest • Migrant is an individual who has moved to a different (rural to urban / urban to rural) municipality within the last five years (recent migrant). • Population: non-enrolled workers 25 years old and older reporting monthly labour earnings in 2006. • Avoiding the endogeneity of schooling decisions and migration (+25) • Avoiding the self-selection into the employment status Focus on self-selection of migrant workers Arnoldshain S 2013 Antwerp, Belgien – Villalobos Barría – Internal Migration in Chile

9. Three Steps Estimation Procedure • First Step: The estimation of a reduced form of the migration index function • Second Step: To use the estimated parameters from the reduced form Probit model as starting values for the estimation of the Heckman corrected wage equations at origin and destination. A potential wage differential is now calculated (which is not more endogenous) • The potential wage differential (in logs) and its square (allowing for nonlinearities) are then included in the third step to estimate structurally the index function for the migration probability Arnoldshain S 2013 Antwerp, Belgien – Villalobos Barría – Internal Migration in Chile

10. Dependence on the Family • Migration is family dependent • The degree to which the remaining members within the household can generate income is important information for the potential migrant. Stark and Bloom (1985) • An individual would be able to move, given other conditions, if he or she knows that in the case of migration, the household will not suffer a considerable reduction in welfare. • correlated to the dependency ratio but conditional on the educational levels within the family • Poor levels of household education would reflect high levels of dependency, which translate into a high opportunity cost in the form of higher reservation wages for the potential migrant (discouraging migration). Arnoldshain S 2013 Antwerp, Belgien – Villalobos Barría – Internal Migration in Chile

11. Results – First Step Arnoldshain S 2013 Antwerp, Belgien – Villalobos Barría – Internal Migration in Chile

12. Results – Second Step Arnoldshain S 2013 Antwerp, Belgien – Villalobos Barría – Internal Migration in Chile

13. Third Step – Structural Form Arnoldshain S 2013 Antwerp, Belgien – Villalobos Barría – Internal Migration in Chile

14. Wage Differential and Education Arnoldshain S 2013 Antwerp, Belgien – Villalobos Barría – Internal Migration in Chile

15. Wage Differential and HH Education Arnoldshain S 2013 Antwerp, Belgien – Villalobos Barría – Internal Migration in Chile

16. Earnings-Gap and the Migration Probability Arnoldshain S 2013 Antwerp, Belgien – Villalobos Barría – Internal Migration in Chile

17. The Story • Potential workers are positively selected in terms of education (years of education). However, this variable is in some extent under the control of the individual. • Potential workers are also positively selected in terms of the education of the other household members. (exogenous to the individual) • On the one hand, high-wage differentials are associated with low levels of household education (good news; the poor could benefit from migration). On the other hand, low levels of household education discourage migration in a great extent. • Market failure. The market signal is cancelled by adverse family background. • Migration flows are not effectively driven by income disparities. They are constrained by household education (as proxy). • No territorial equalization is expected. The elimination of this household dependency would contribute to close the earnings-gap across the territory Arnoldshain S 2013 Antwerp, Belgien – Villalobos Barría – Internal Migration in Chile

18. Further Discussion • Migration as an investment decision requires to solve this market failure • Programs encouraging labour mobility among the poor by providing Information on labour markets at possible destinations • Financial support for the household after migration of the potential worker • Migrant support at the destination Arnoldshain S 2013 Antwerp, Belgien – Villalobos Barría – Internal Migration in Chile

19. Thank you for your attention! Arnoldshain S 2013 Antwerp, Belgien – Villalobos Barría – Internal Migration in Chile