Hidden Income and the Perceived Returns to Migration: Experimental Evidence from Kenya

In many developing economies, urban workers earn substantially more than rural workers with the same level of education. Why don’t more rural workers migrate to cities? I use two field experiments in Kenya to show that low migration is partly due to underestimation of urban incomes, and that this inaccurate information can be sustained by migrants’ strategic motives to hide income to minimize remittance obligations. Parents underestimate their migrant children’s incomes by nearly half, and underestimation is greater when a migrant’s incentive to hide income is higher. Providing information about urban earnings increases migration to the capital city by 39% over two years.