Selective in-migration and income convergence and divergence across Belgian municipalities

Abstract

In this paper, we present an empirical study of the relationship between aggregate migration and the income distribution across locations in a region. We use cross-sectional data on growth of per-capita taxable incomes, over the period 1991-2000, from the municipalities of the Belgian province of Limburg. We use a non-standard beta -convergence framework, built on the notion of ‘weak absolute convergence’, to test the hypothesis of selective income migration. The model we develop allows us to separate out observed and unobserved heterogeneity in convergence rates. Observed heterogeneity is incorporated by including net in-migration and initial-education variables. Unobserved heterogeneity is related to amenity differentials across locations. The model is estimated by using the generalized maximum entropy method, which allows for the ‘non-parametric’ estimation of the effects of the unobserved factors. While we find an average beta-convergence rate of about 4.2% annually, the heterogeneity in beta-convergence rates is consistent with an increasing dispersion (beta-divergence) of income levels, due to selective in-migration. Our empirical evidence indicates that, overall, the initially high-income municipalities (including the main regional urban centres) as well as their immediate neighbours gained the most from selective income migration. We conclude that patterns of in-migration in the 1990s provided the basis for a cumulative process of divergence of per-capita incomes and a growing spatial concentration of high-income locations in the amenity-rich, south-western part of the province.