Unequal Provinces But Equal Families? An Analysis of Inequality and Migration in Thailand1

In Thailand, gross provincial product is highly unequal while household income exhibits moderate between-province inequality. This paper introduces a dynamic model to analyze the link between migration and cross-province inequality. The wage differential drives rural-to-urban migration and in turn the wage rate at the destination is affected by total amount of migrant labor supply. Migration generates a net income gain for migrants and they share that income gain with household members, remitting cash and goods. Remittances thus help redistribute income toward poor provinces, resulting in a lower level of cross-province inequality in household incomes. Simulations of migration, wages, inequality in production and inequality in income suggest that the benchmark model provides a good approximation to Thai reality. Fixed effects estimation shows a statistically significant effect of migration on income inequality: increasing the mean fraction of out-migrants to Bangkok by 1 percent leads to a .058 reduction in the average ratio of Bangkok’s income to all other provinces (an elasticity of -0.11).