The Income Returns of Work-Related Internal Migration: Does Moving Distance Matter?

While the overall effect of internal migration on incomes is well-established, the role of moving distance in this relationship is still unclear. On the one hand, the ability to search for and take a job across larger spatial distances is associated with higher labour market rewards, as it allows individuals to draw from a larger pool of employment options to find the most suitable match. On the other hand, moving across larger distances is associated with higher (social-psychological) costs, as it implies a stronger detachment from one’s social network and higher mental burdens. Taken together, this should result in a positive distance gradient in returns of migration, as individuals would only bear the additional costs of moving across larger distances if they expect to reap higher economic benefits. At the same time, (especially partnered) women might disproportionally bear the costs of long-distance relocation while not yielding the benefits, as they are in more spatially ubiquitous occupations (with lower migration premiums) and often move as ‘tied movers’ (i.e. follow their spouse into migration).

We draw on longitudinal data from the German Socio-Economic Panel study to estimate fixed-effects panel regressions of net incomes on internal migration. In line with our theoretical expectations, our analyses reveal that migration returns increase with distance. Furthermore, the positive distance effect seems to level off at larger distances. This could indicate that there are some limitations in either the necessity (due to stabilizing costs of moving) or ability (cf. ‘bounded rationality’) of individuals to create an even greater employer-fit. Furthermore, while women show negative economic effects of migration at short distances, they seem to partially catch up across distance (albeit these effects are statistically insignificant).