Migration Frictions, Earnings Differentials and Spatial Misallocation: Evidence from Thailand.

This paper quantifies the disutility of labour migration, characterize the migration contribution to labour supply elasticity, and estimate the effect of migration frictions on spatial earnings differentials and labour misallocation in Thailand. The study structurally estimates a spatial equilibrium model using commodity prices as instruments for local earnings to overcome endogeneity and selection, and to identify the net present value returns to potential migration. The findings show that migration contributes 9.5 percentage points to labour supply elasticity at the extensive margin, which is 25-50 per cent as large as existing intensive-margin estimates among non-movers. The disutility from migration is 1.0-1.2 times annual earnings; alleviating this friction would induce a quarter of the population to relocate and lower spatial earnings variation by 20 per cent. However, gains would be realized primarily in non-wage utility with a modest 3 per cent increase in national product, suggesting migration frictions play a limited role relative to preference heterogeneity in productive misallocation. [ABSTRACT FROM AUTHOR]