Population aging, migration spillovers, and the decline in interstate migration

Abstract: We investigate the role of the aging of the U.S. population in the decline in interstate migration since the mid-1980s. Using an instrumental variables strategy on cross-state data, we show that an aging workforce causes the migration rates of all age groups in a state to drop. This demonstrates that the effect of aging on migration includes indirect effects that go beyond the direct effect of raising the workforce share of groups with lower migration rates. We then develop an island model in which firms can hire workers either locally or from other locations, and show that an aging population leads firms to recruit more locally. This improves the local job prospects of all workers, which causes migration rates of all age groups to fall, consistent with our empirical findings. Our quantitative analysis suggests that this channel accounts for around half the migration decline, substantially more than what would be predicted solely by the direct effect.

Keywords: interstate migration; labor mobility; population aging;

JEL Classification: D83; J11; J24; J61; R12; R23;

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Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Staff Reports

Publication Date: 2017-04-01

Number: 699