Internal Migration: A Cost-Effective Method for Raising Wages, Improving Living Standards, and Promoting Economic Growth

Nearly 90 percent of humans live within their region of birth^[1], potentially leaving large welfare gains on the table. Lured by the prospect of picking trillion-dollar bills off the ground^[2], organizations have (rightly) directed resources towards building global migration pathways and lobbying for relaxed immigration policy^[3].

However, promoting immigration is costly and faces legal challenges. Even some of the most promising ventures require 10’s of thousands of dollars to help a single person from a low- or middle-income country move through the narrow pathways available to a high-income country^[4]^[5]. At that rate, it would require an investment equivalent to a significant fraction of global GDP to help the hundreds of millions who would like to move^[6]. Even if the resources are found, open migration windows may arbitrarily close shut. For example, one Open Philanthropy grant (>$1mm) secured only 14% of expected US visas for its pool of Haitian workers due to unforeseen decisions at the consulate^[4]. These costs and legal barriers threaten the cost-effectiveness of immigration as a tool for poverty alleviation.

For those interested in harnessing the benefits of human movement without needing to overcome arbitrary legal barriers, internal migration offers an additional pathway at a fraction of the cost.

Large wage and living standard differentials exist within low- and high-income countries around the globe, with stark rural-urban divides. Given these gaps, helping people move to more productive areas of their country has the potential for large-scale poverty alleviation, highlighting the importance of this area.

Despite the potential benefits, 6 out of 7 people in the world live within the region of their birth^[1], meaning there is plenty of room for progress. There are some efforts to address this problem, but they mainly focus on inter-country immigration. Given the problems outlined above, and that global migration is itself a neglected area, these efforts likely will not reach the billions who could see benefits from moving. Given the immense size of the problem and the lack of sufficient solutions, this area is highly neglected.

Fortunately, tractability is high. There are proven methods to spur internal migration. From informational campaigns to subsidized travel, effective solutions (>1,000x return) can be deployed to realize the considerable gains available in this area.

Importance

Incomes and development indicators differ greatly within nearly every country around the globe, especially between urban and rural areas. Most people in extreme poverty live in rural areas^[7], while very few exist in productive towns and cities which provide higher wages and greater standards of living. A worker in Nairobi earns four times as much as a worker in a rural town just a bus ride away^[8]; a mother in rural Nigeria is nearly twice as likely to lose her child before their fifth birthday than a mother in Lagos; a city-dwelling Indian is twice as likely to have access to a toilet than a rural worker^[9].

These gaps do not just exist in low- and middle-income countries. In the US, where 90% of young adults still live within 500 miles of their hometown^[10], the median income in the highest-earning state is double the median income in the lowest-earning state^[11]. Individuals born in Puerto Rico but live on the mainland earn more than 50% more than those that remain on the island^[12]^[13]. Infants born in Mississippi die at twice the rate of children born in California^[14].

Internal migration, migration within a country, can help low-income individuals realize sizeable income and standard of living gains. Unlike with international immigration, most nations do not impose arbitrary restrictions on movement within their borders. This means individuals are free to move to new areas with better opportunities. By moving to a city in their country with higher wages, a worker can multiply their income. By relocating to a high-income area, a family can enjoy greater access to resources and basic services. Internal migration can help people seize the opportunities presented by large welfare differences within countries.

While regional differences or outcomes for current migrants cannot tell us exactly the gains new migrants may realize^[15], even capturing a fraction of those differences results in major gains. Just doubling a Kenyan worker’s income or increasing the chance a Nigerian mother’s child lives by 50% would confer benefits large enough to make even expensive interventions cost-effective.

But to get a better sense, there is some evidence funders can examine to conduct rudimentary cost-benefit analyses. For instance, Baseler (2022)^[8] conducts an RCT of a simple informational campaign in rural towns in Kenya, providing households with information on the wages available in urban cities. Households who receive the treatment, just simple information, significantly increase migration to Nairobi, which persists in subsequent years. Families who send an additional migrant reap the rewards, earning $249 more per month (from a baseline of $139), a 179% increase in income. This suggests thousands of dollars a year in benefits, and tens of thousands over a career (more so if urban wages continue to outpace rural wages). Absolute gains could be even larger in high-income nations, where wage differentials range in the 10s of thousands. If informational campaigns can target internal migrants for cheap, funders could easily surpass the “1,000x” benchmark just from the income gains to the individual movers alone.

But income gains are not the only benefit for movers, with other standards of living higher in these high-wage areas. Infants who are attended to by medical professionals, who are more readily available in high-wage areas, are more likely to survive birth.^[16] Facilitating internal migration by reducing transport costs results in greater female employment^[17]. Electricity flows more freely to those living in urban centers^[18]. By spurring internal migration, we can increase access to resources, empower women in the labor market, and save newborns (which all bolster cost-effectiveness).

Those children who survive thanks to internal migration will also go on to see enormous benefits. Children in urban centers not only have more access to schooling^[19], but that schooling can provide more human capital^[20]. With that increased human capital, and increased access to high wages in their city of birth, the children of internal migrants will go on to earn multiples more than what they would have made had their parents never moved. When considering the intergenerational benefits, the impact of internal migration only grows larger.

Of course, those who move (and their hypothetical children) are not the only ones who benefit from internal migration. Those who remain behind often benefit as well, from money internal migrants send back, linkages with new areas, and decreased labor competition in origin towns. For example, an RCT by Akram et al. (2014)^[21] provided transport subsidies to treated villages in rural Bangladesh, which increased the proportion of households sending a migrant to a city by 30 percentage points (which persisted in follow-up years). While the individuals who moved saw benefits, so did those that remained, as agricultural wages in the treated villages increased by roughly 4-6 percent as more laborers left for the city^[21]. By boosting benefits for non-movers, internal migration increases its impacts even further and bolsters the cost-effectiveness calculations.

The wider benefits do not end there, as internal migration has the potential to improve broader economic growth within a country. Promoting economic growth by enticing workers away from low-productivity activities and into productive areas is not a new idea, as Arthur Lewis modeled this phenomenon back in the mid-century. In the Lewis model, agricultural workers with minimal marginal productivity can move into higher-wage work (such as manufacturing in a city), generating substantial welfare gains for the workers and the wider economy with little cost.^[22] Economists have come a long way since Lewis, building up the theory and evidence. From forming agglomeration economies with thick labor markets to forging beneficial networks^[23], urbanization can promote economic growth^[24], which is perhaps why it is so strongly associated with GDP per capita in 2022^[1]. Countries can still realize gains through promoting urbanization today, as enticing even a fraction of agricultural workers into higher-wage roles in cities could cause significant growth in GDP^[25]. By promoting economic growth, internal migration can help lift broader populations out of poverty.

How much room does the world have to make progress on this front? There are currently around 2.4 billion individuals between the ages of 15 and 35^[26] (a small window of young adults who may benefit the most from higher wages over a working career). If approximately 40 percent live in rural areas^[27] (a very rough proxy for lower wages), that means there are potentially 1 billion individuals who could be prompted to move to higher-wage locations. With that many people, there is plenty of opportunity for funders to enter the space and promote internal migration to increase wages and economic growth.

Tractability

How might a funder go about realizing these gains? There are several avenues an organization could follow for promoting (and understanding) internal migration.

Informational campaigns

Many people do not move for the simple fact that they do not know about their alternative options. A worker might be able to earn four times their wage in a neighboring city, but without access to credible data, they may never know what they are missing. The little information they may be able to access is often biased, as current internal migrants may lie to families and friends about their increased wages to reduce pressure to send remittances back. Without proper information on the large wage disparities within their country, people who would be internal migrants will never make the move.

One way to combat this is to simply provide people with the correct information on wage differences within their country. Individuals who are provided credible information will update their beliefs about what they can earn by moving, prompting more to leave for better opportunities. These new internal migrants will earn the significantly higher wage in the new location and enjoy a much higher standard of living.

This method has been rigorously tested through an RCT conducted by Baseler (2022). Treated households in a rural town in Kenya were provided accurate information on the wages earned in nearby cities (wages are 4 times higher in Nairobi). Households revised upwards their expectations of potential wages from moving to the capital city and, as a result, increased migration there by roughly 40 percent over two years. The ITT estimate on income is large, increasing monthly income by over $32 ($384 a year), but the IV estimate for families who send an additional migrant is larger at $249 per month ($2988 per year). Given the treatment caused migration to Nairobi to persist over multiple years, these benefits will continue to accrue to internal migrants and their families in the long run (and perhaps grow as wage growth in the capital outpaces growth in rural towns). If cheap informational campaigns can effectively target likely movers, the “1,000x” benchmark could be easily surpassed just on the direct income gains alone.

Something to note is that the results in Baseler (2022) are not driven only by the creation of new internal migrants on the margin, but by updating the beliefs of current ones. Many individuals are already internal migrants, willing to move from their hometowns to find higher wages. But they often move to an area that isn’t much more productive than where they started. When these internal migrants updated their beliefs about wages, they updated their ultimate destination, moving to productive areas rather than unproductive ones. In this way, informational campaigns do not need to detect who may be a marginal internal migrant or induce new individuals to give up their homes. They can target existing internal migrants, overcoming those cumbersome and costly barriers, and still generate large benefits, which only adds to their cost-effectiveness.

These kinds of informational campaigns will be most effective when targeting areas with less access to information on wage differentials. These may be areas with limited access to information technology, less economic ties to urban centers, and little existing internal migration to cities. Without these, there is not much chance for people to learn about the economic conditions in cities, whether via the internet, business connections, or word-of-mouth from family and friends. In these areas, informational campaigns may have the greatest impact on updating beliefs about wages in destinations, which will ultimately spur the most internal migration.

Subsidies and incentives

Moving can be expensive, especially for those in low-income countries where wages are low and transport costs are high. Even if a potential internal migrant knows they can earn more in a new city, they may not have enough resources to make the trip. Without some assistance, many individuals will be unable to realize opportunities for large gains from internal migration.

Small subsidies or incentives to move can help individuals overcome transportation costs or give them just enough of a nudge to make the move. Reducing the bus fare to the city will lessen the upfront costs of moving, encouraging workers to step on board. Providing an incentive to move will give workers immediate financial upside to make the trek to a new city.

These methods have also been rigorously tested through RCTs. Akram et al. (2014) subsidized transport in rural villages in Bangladesh, which increased the proportion of households sending a migrant to a city by 30 percentage points. Bryan et al. (2014) similarly provided households in rural Bangladesh with a small $8 incentive to migrate during the lean season. This increased the rate at which households sent a migrant by 22 percentage points. Small financial benefits are clearly an effective tool to encourage internal migration.

These types of financial interventions are most likely to be effective in areas where linkages to high-wage cities are strong, but households are poor and transport costs are high. With existing internal migration (or other connections) to high-productivity areas, individuals will likely have a good sense of how much more they can earn by moving. However, due to insufficient income and savings or unmanageable transport costs, these would-be internal migrants will be unable to seize the opportunity, instead being stuck with low wages in their current location. By helping these individuals overcome the financial hurdles, funders can help them reach their high-wage destinations.

Infrastructure

In some contexts, households may have knowledge of higher-wage areas and even the resources to move, but there just might not be any reasonable infrastructure to connect their areas. There may be no well-maintained roads to help facilitate travel; the absence of a bridge may make a potentially short trip into an excruciating long trek. Building key infrastructure can reduce these frictions and make internal migration possible.

Of course, infrastructure projects are often expensive, requiring a major upfront investment. Because of this, it is unclear if the marginal increase in internal migration will make any specific project cost-effective. However, building infrastructure has many other positive benefits which make projects well worthwhile. Exploring the wider benefits of infrastructure is outside the scope of this piece. Nonetheless, it is important to note that this is another area that could spur internal migration, along with other positive outcomes.

Addressing other constraints

Even if people know they can earn higher wages, and have the resources and ability to move, many do not. Risk-averse individuals may balk at the uncertainty of moving to a new location, while others may be unable to conceptualize the opportunity costs of staying put. Others still may stay put due to emotional attachments, or just because their hometown is what they are used to. These nonfinancial barriers can impede individuals, and economies, from realizing the benefits of internal migration^[1].

Interventions to address these barriers are not as well tested as informational campaigns or financial incentives. This is a key area for researchers to explore if they want to better understand the barriers to internal migration, and perhaps find new, cost-effective methods to generate movement. These interventions are likely to be most effective where households have accurate information, the resources to move, and access to infrastructure, yet still do not move. This may be best suited for lower-income areas in high-income countries, where information is readily available, individuals can afford to move, and infrastructure exists.

Research

The lack of answers in this area highlights the need for more research broadly into internal migration. Funders can put resources towards researchers working on open questions in this area. How can informational campaigns best target current internal migrants who are moving to sub-optimal destinations, improving cost-effectiveness? Which contexts have high internal migration rates currently but high transport costs, making them prime candidates for financial incentive interventions? What policy interventions can best move the needle on reducing the non-financial barriers, such as lowering uncertainty or status-quo bias which keeps would-be internal migrants from moving? Answering these questions will enable funders to funnel resources to the most cost-effective strategies.

Neglectedness

Those resources funneled to research, or proven interventions, will be going to a highly neglected cause. With 6 out of 7 people in the world living in the region of their birth, the lack of movement is a striking phenomenon that leaves massive welfare gains on the table. The scale of the problem and the potential benefits requires a response to match, yet efforts remain insufficient. While several funders and organizations are looking to tackle the problem through international immigration policies^[28], their efforts remain inadequate, run up against cost and legal issues, and ignore internal migration. While some individual researchers and policy centers have written on internal migration, there are no large-scale efforts^[29] to harness its potential. Any resources a large philanthropic group puts towards internal migration has little potential to crowd out current programs, but major potential to effectively generate welfare benefits.

Why Internal Migration May Fail

It is important to understand how internal migration may fail to produce the potential benefits outlined in this piece. Funders need to assess the risks of putting resources towards this area before making commitments.

Despite large wage differentials within countries, and the causal evidence of the impact of internal migration, moving to a high-wage area might not produce the benefits funders expect. While it is highly unlikely, most of the wage gap between high- and low-wage areas may be due to productivity differences among workers, not locations. Therefore, if an individual earning low-wages moves to a high-wage area, they will continue to earn low wages. Even if that is not the case, a large increase in the number of internal migrants may put downward pressure on wages and upward pressure on prices in high-income areas, decreasing the impact of moving. In addition, locals in high-wage areas may perceive the movers as “outsiders” despite being of the same nationality, resulting in wage and employment discrimination. For non-wage benefits, internal migrants may have a harder time accessing resources such as electricity or services such as healthcare than those local to high-wage areas. These are just a few factors that could weaken the impacts of moving, threatening cost-effectiveness.

The long-term outcomes of internal migration are also a source of uncertainty. Internal migrants may choose to return home seasonally, or for good at some point. This means they will not fully realize the gains of a working career spent in a higher-income area. If they migrate only seasonally or move back, internal migrants are less likely to raise their children in these high-income areas, diminishing any intergenerational benefits. With only a few studies with long-term follow-ups, there remains uncertainty about how permeant internal migration is.

Interventions may prove less effective when implemented at a larger scale. Any policy faces the threat of weakened impact when scaled^[30]. Internal migration interventions are no exception, especially if they are to be scaled to reach hundreds of millions. Implementers may find the marginal cost of promoting optimal internal migration rise after the low-hanging fruit, current and likely movers, are reached. It might also be true that the non-financial barriers, such as emotional ties and status-quo bias, are just too difficult to overcome, limiting the potential reach of interventions. These factors may make it difficult for funders to achieve the large-scale impact they would like through internal migration.

Conclusion

Despite these potential challenges, internal migration still presents a cost-effective pathway for funders interested in increasing welfare. Through interventions such as informational campaigns or transport subsidies, organizations can spur internal migration and generate large gains for movers, their families, non-movers, economies, and future generations. By putting resources towards evaluation of funded programs and additional research, organizations can better understand internal migration, fine-tune programs, and continuously improve cost-effectiveness to ensure it remains above the “1,000x” benchmark. With little attention paid to it despite its potential to benefit billions, internal migration is a cause that represents an incredible opportunity for philanthropy.

Footnotes

^
McKenzie (2022) – “Fears and Tears Should More People Be Moving within and from Developing Countries, and What Stops This Movement?”
^
Clemens (2011) – “Economics and Emigration: Trillion-Dollar Bills on the Sidewalk?”
^
Open Philanthropy – “Immigration Policy”
^
Open Philanthropy – “USAIM — Seasonal Migration from Haiti”
^
Malengo – “The Impact of Malengo”
^
Gallup (2018) – “More Than 750 Million Worldwide Would Migrate If They Could”
^
Our World in Data – “Global Extreme Poverty”
^
Baseler (2022) – “Hidden Income and the Perceived Returns to Migration”
^
Lagakos (2020) – “Urban-Rural Gaps in the Developing World: Does Internal Migration Offer Opportunities?”
^
Sprung-Keyser et al. (2022) – “The Radius of Economic Opportunity: Evidence from Migration and Local Labor Markets”
^
FRED Economic Data – “Real Median Household Income by State”
^
US Census Bureau – “Quick Facts: Puerto Rico”
^
Pew Research Center (2014) – “Puerto Rican Population Declines on Island, Grows on U.S. Mainland”
^
CDC – “Infant Mortality Rates by State”
^
Gaps may be partly due to productivity differences between workers from different regions (as opposed to productivity differences between locations). Selection bias may mean outcomes for current migrants may not translate to new migrants.
^
Save the Children (2011) – “Missing Midwives”
^
The Economist (2022) – “New transport infrastructure helps South Asian women into work”
^
World Bank – “Access to electricity”
^
UNESCO (2015) – “Fixing the Broken Promise of Education for All”
^
van Maarseveen (2020) – “The urban–rural education gap: do cities indeed make us smarter?”
^
Akram et al. (2017) – “Effects of Emigration on Rural Labor Markets”
^
Lewis (1954) - “Economic development with unlimited supplies of labour”
^
Huang et al. (2020) – “Urban network externalities, agglomeration economies and urban economic growth”
^
CFR (2009) – “China’s Internal Migrants”
^
World Bank (2005) – “China: Integration of National Product and Factor Markets, Economic Benefits and Policy Recommendations”
^
United Nations – “World Population Prospects 2022”
^
World Bank – “Rural population (% of total population)”
^
Open Philanthropy – “Labor Mobility”
^
That the author is aware of. The UN/UNHCR does have some programs that focus on internally displaced persons, but this is a distinct category from voluntary internal migrants.
^
DellaVigna & Linos (2020) – “RCTs to Scale: Comprehensive Evidence from Two Nudge Units”