Gross Migration, Housing and Urban Population Dynamics

Cities experience near random walk productivity shocks, yet population is slow to adjust to them. We use a calibrated dynamic general equilibrium model of cities to disentangle the influence of two natural sources of this slow... [ view full abstract ]

Cities experience near random walk productivity shocks, yet population is slow to adjust to them. We use a calibrated dynamic general equilibrium model of cities to disentangle the influence of two natural sources of this slow adjustment: inelastic local housing supply and the intrinsic costs of migration. Our model incorporates a new theory of migration and reproduces patterns we uncover in a panel of US cities. We find that the intrinsic costs of migration are the prime driver of slow population adjustments while housing plays a more limited role. Furthermore we find that migration costs can explain persistent urban decline.