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This paper draws on micro-level data to fully inform the debate on decentralization and regional development. Using labor-income trajectories of emigrants from Mexico City, the paper analyzes how the labor market in a regional city, Leon, evolves. Results from the econometric model suggest that migrants’ labor-income trajectories differ between the large agglomeration and the regional city in an early stage of the evolution of the labor market, but converge in a later stage. Specifically, the slope of the earning function for recent migrants is steeper and statistically different from the slope for early migrants. The findings presented in this paper enrich the existing theory by providing microfoundations to a typically macroeconomic area of research and enable policy makers to better understand the processes underpinning the evolution of regional labor markets. [ABSTRACT FROM AUTHOR]