The Dynamic Migration Game: A Structural Econometric Model and Application to Rural Mexico. (Job Market Paper)
The migration decisions of households in a village can be thought of as a dynamic game in which each household makes decisions about how to allocate its members across distinct activities, taking into account dynamic considerations about the future and strategic considerations about what neighbors in the village are doing. We develop and estimate a structural econometric model of this dynamic migration game, and apply it to households in rural Mexico. We use the estimated parameters to simulate the effects of counterfactual policy scenarios, including those regarding wages, government policy, schooling, crime rates at the border, and precipitation, on migration decisions and welfare. Results show that analyses that ignore the possibility of strategic interactions or dynamic behavior lead to misleading results. In addition, owing in part to strategic interactions and dynamic behavior, a cap on total migration to the US decreases migration not only to the US but also within Mexico as well, causes migration to the US to decrease by more than what was required by the policy, and decreases average welfare per household-year.