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Labour market impact of internal in-migration: A district level analysis of South Africa

Despite the lack of clarity in literature with regards to the question of whether internal in-migration is a desirable phenomenon for the labor market outcomes, in-migration is often resisted under the premise that it leads to tighter job markets for the locals. This study therefore attempts an empirical verification of the impact of in-migration on labour market outcomes in South Africa. The results of dynamic system GMM regression analysis indicate that in-migration decreases the labour market participation rate of the migrant receiving districts, highlighting migration for non-economic purposes as well as discouraged migrants not seeking work post-migration. While In-migration is not found to alter significantly the employment rate of the receiving areas, indications are that the employment rate is maintained through an expansion of the informal wage employment. There is evidence of non-linear relationship between in-migration and the labour markets of the receiving areas. While initial migration results in the expansion of the formal sector employment, sustained increase in in-migration leads to informalisation of the labour markets. There is hence little evidence of positive self-selection among internal migrants in South Africa. Our results corroborate the Harris-Todaro model’s prediction that in-migration leads to increased informal sector share of the labour markets.

Working paper 667
1 February 2017
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