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Abstract

We analyse the relationships between subjective wellbeing (SWB), wages and internal migration. Our study addresses whether people make (revealed preference) location and migration decisions based on SWB and/or wage prospects. We present both a theoretical intertemporal location choice model and empirical analyses using the Australian longitudinal HILDA dataset. Our theory predicts considerable heterogeneity in location choices for individuals at different life stages depending on their individual characteristics, including their rate of time preference. We find that people’s location at a point in time is determined largely by their previous period’s location reflecting high moving costs. In addition, labour market conditions affect location choice and influence individuals’ decisions to migrate out of an area. Focusing on migrants, we find that place-based SWB is a highly significant ex ante predictor of a migrant’s chosen location. Furthermore, we find a significant and sustained ex post uplift in individual SWB for migrants, which holds across a range of sub-samples. By contrast, wage income responses show much less significance, albeit with heterogeneity across groups. The estimated pronounced upturn in SWB for migrants substantiates the usefulness of SWB both as a concept for policy-makers to target and for researchers to incorporate in their studies.

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