Net Migration and State Labor Market Dynamics

Existing empirical estimates of net migration models are not identified because they lack an explicit measure of expected future conditions. I find that using actual one-period-ahead net migration at the state level to control for expectations reduces the strength of the relationship between current wages and net migration by more than one-third. I use the case of Michigan to show how existing empirical models mischaracterize the response of migration to shocks that are expected to be transitory. I add migration to a labor market model and simulate responses to permanent and transitory demand shocks.