Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

Abstract: The accepted rural-urban migration theory suggests that economic gains are made by moving from a rural to an urban area. Its premise is: “If you stay, you lose.” However, are losses still the rule? And, if so, how big is the economic loss once other factors are controlled for? In this paper, we specifically focus on the income effects of migration decisions among young individuals from rural areas, using microdata for Sweden. We find that, contrary to accepted theory, staying in a rural region most often is insignificant in relation to an individual’s income level. When taking housing values into account, it can even be financially beneficial for some to stay in a rural area. Only for highly educated individuals is it consistently financially beneficial to move to an urban area, also after controlling for housing costs.

Keywords: rural-urban youth migration; income; mover; stayer

JEL-codes: J10; P25; R23

26 pages, February 20, 2019

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