MIGRATION AS A CONSUMPTION ACTIVITY

While a generalized utility maximization approach to migration decisio nmaking is not innovative, the principal extensions of this paper invo lve the search for an instrument capable of measuring changes in utili ty levels consistent with all preferences (i.e., with all forms of uti lity functions), requiring only data on observed behaviour. Our approa ch is to construct a Location-Specific Utility Index (LSUI), whose com ponent variables serve as proxies for the arguments in households' uti lity functions. The LSUI is calculated for households at two times (be fore and after the migration decision) and then compared to produce a utility change index (the Delta Index) for each household. The approac h is distinctive in that the Delta Index measures only the direction o f the change in a household's utility level due to its migration. The ordinal nature of utility rankings thus is not violated through aggreg ation over households or cross-sectional comparisons of utility levels . Our database is the Panel Study of Income Dynamics (PSID), a longitu dinal nation-wide sample survey conducted by the University of Michiga n's Institute for Social Research. It provides information on more tha n two hundred variables per household per year. The objective is to te st empirically whether migration is appropriately modelled as utility- generating behaviour. The testable hypothesis is formulated as follows : Assuming constant household preferences and expansion of the househo ld's feasible set over time, the household's utility level is greater following the migration decision. Stepwise discriminate analysis is us ed to measure the contributions of the component variables to the move decision. The conclusion reached through the stepwise discriminate an alysis is that the LSUI and the Delta Index must be revised to include only six components: quality of life, proximity to relatives and cult ural roots, net present value of future earnings, real household consu mption, job security, and type of housing. The results are compared wi th the households' migration decisions. The empirical evidence shows t hat migration may reasonably be modelled as a consumption activity by households to maximize utility.