Spatial Dependence, Social Networks, and Economic Structures in Regional Labor Migration

Abstract

This study empirically analyzes the determinants of regional labor migration in Japan, where small towns are disappearing due to the shortage of labor. Using spatial models of origin-destination flows and considering network effects of labor and economic structures, we obtain results more consistent with the standard migration theory than previous studies. First, unlike previous studies, we find that migration decisions in Japan are based on economic motivations consistent with economic theories. Particularly, unemployment rates in origins and destinations and income in origins are found to be the determinants of labor migration. Second, we report that network effects, which help reduce migration costs, have encouraged relocation of labor. Third, considering spatial weights based on distance, goods flow, and economic structures, we show that neighbors can be most appropriately defined with economic structures; migration patterns are alike in regions with similar economic structures