Welfare Schemes and Support Mechanisms

The Curse of Location: Investigating Links between Income Mobility, Migration and Location Premium

Author : Hari K. Nagarajan, Kailash Pradhan, Anuj Sharma | 2017
Published By: World Bank

Mobility serves as an indicator of the relationship between short and long run inequality. Understanding mobility is crucial for deriving policies that affect household’s incomes. Since long run income is more equally distributed than short run income it is important to understand the mechanics of income mobility. In this paper we have used a unique household dataset spanning more than 3 decades from rural India to derive what may be broadly classified as the triggers of income mobility. We believe and wish to show that location and outcome of location place a crucial role in determining the magnitude of income mobility. Given that in low income countries migration is a significant cause for income mobility, we show that its magnitude is influenced by the relationship between income premium (benefits accruing to the household due to location) and migration. There is thus a three way relationship between income premium, migration and income mobility. We find that increases in household income premium will reduce the likely hood of a given household (members of that household migrating). Consequently we are more likely to observe a reduction in overall income mobility. A policy implication of this finding is that if development is not uniform across the economic space. Income mobility will decline in the long run.

URL : http://www.ecineq.org/ecineq_ba/papers/nagarajan.pdf

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