By Luca Marchiori, Julien Pascal and Olivier Pierrard
We develop a monocentric urban search-and-matching model in which workers can choose to commute or to migrate within the region. The equilibrium endogenously allocates the population into three categories: migrants (relocate from their hometown to the city), commuters (traveling to work in the city) and home stayers (remaining in their hometown). We prove that the market equilibrium is usually not optimal: a composition externality may generate under- or over-migration with respect to the central planner’s solution, which in all cases results in under-investment in job vacancies and therefore production. We calibrate the model to the Greater Paris area to reproduce several gradients observed in the data, suggesting over-migration. We show how policy interventions can help to reduce inefficiencies.
Interesting paper with a surprising result, and I wonder whether it holds up for other cases. My anecdotal experience is that people are generally unhappy about their commute yet they choose that equilibrium because others chose it as well. That suggests to me that there is a coordination problem leading to a second best, and that more migration closer to the workplace should be encouraged.
In this context is Paris special? Again from anecdotal observation, I am struck how many people choose to live within city limits even though they work elsewhere (suburbs and even other cities). This looks like under-migration to me, but maybe I do not know representative people.