The Urban Hierarchy and Domestic Migration: The Interaction of Internal Migration, Disposable Income and the Cost of Living, Sweden 1993-2002

PWP-CCPR-2010-026

Abstract

This paper examines the variation in gains and losses from migration within the Swedish urban hierarchy. The central questions focus on whether increases in disposable income outweigh the associated increases in housing costs, especially with movements up the urban hierarchy to larger and more expensive locations. The paper extends the literature which considers cost of living adjustments associated with individual and household migration. The questions are addressed using Swedish Census data for 3.5 million individuals and two fixed effect panel models are estimated for four consecutive time periods, 1993-2002. The results consistently show relatively higher increases in disposable income moving up the urban hierarchy. Taking changes in housing expenditure into account, this pattern is however reversed; the largest gains are made by households moving from larger to smaller labour markets, a significantly smaller share of total domestic migration. The results point to factors beyond short term nominal income gains as important in explaining the bulk of domestic migration.