On Tuesday March 1st, Michael Waugh will speak on “Risk, Selection, and Rural-Urban Migration” (4pm, E530 Dealy). Prior to joining NYU’s Stern School, Professor Waugh (MA Fordham, 2003; PhD University of Iowa, 2008) was a research economist at the Federal Reserve Bank of Minneapolis. A common theme in Waugh’s research is the large potential welfare gains from movement of goods and people. In a paper entitled “Macroeconomics of Rural-Urban Migration”, Dr. Waugh and coauthors David Lagakos and Mushfiq Mobarak use new 2009-2010 tracking surveys from Tanzania, Uganda and Malawi to explore the impact of migration on total consumption. Migration is driven by a rural-urban gap that incorporates migration risk, worker sorting, and the utility cost of migration. The model and data show that “rural-urban migrants experience large increases in consumption on average.” Only 5% of migrants experience consumption declines. “On average, migrants doubled their consumption between survey years, while the median migrant had a consumption gain of 49 percent…. Relative to households that stayed in rural areas, migrants had 40 percent higher consumption…” Though policy makers are often reluctant to encourage people to move, this paper’s findings suggest large potential gains from rural urban migration.
Similarly, Professor Waugh’s research points to large unrealized welfare gains from international trade. A recent paper coauthored with B. Ravikumar, “Measuring Openness to Trade”, (forthcoming, Journal of Dynamics and Control) proposes a new measure of “trade potential”, which compares country’s observed trade/GDP share to “frictionless” trade share. Each country’s potential welfare gain from moving to a world with frictionless trade is computed using a standard multi-country trade model. Each country’s potential depends only on its trade elasticity and the country’s observed trade and income. It is found that poor countries have larger unrealized trade potentials compared to rich countries. Rich countries are generally more open to trade realizing a greater share of their trade potential. Trade potential index correlates strongly with estimates of trade costs, while the welfare cost of autarky and the observed volume of trade exhibit weak correlations with trade costs. Despite large potential welfare gains from trade, rich and poor countries are surprisingly close to autarky as measured by this new trade potential index (see the top panel of Figure 2). A closer look (zooming in on autarky, lower panel Figure 2) reveals that Germany, Luxembourg and the Netherlands are realizing the largest share, though by no means all of their potential welfare gains from trade.
Department Seminar: Tuesday, 1st March, 4 – 5:15 pm Topic: Risk, Selection, and Rural-Urban Migration
Economics Conference Room, Dealy Hall E-530