Impact of Internal In-Migration on Income Inequality in Receiving Areas: A District Level Study of South Africa

The impact of internal migration on regional income inequality of the receiving areas has hitherto gone largely unstudied. This dearth of literature is especially surprising because income inequality and in-migration into urban centres of growth are two issues that many developing economies are faced with and tackling these issues effectively involves understanding the interactions between these two related phenomena. This study is therefore a first attempt to analyse the impact of internal in-migration on receiving areas and is placed in the context of South Africa. Based on a conceptual analysis, the study argues that in-migration into the formal sector of the receiving areas will in general reduce inequality while in-migration into the informal or unemployed sector increases inequality. Using individual panel data the study further tests empirically at the district level the impact of in-migration and finds that rising urban inequality in urban areas can be attributed at least in part to rural-urban migration. This works through both the wage as well as employment channel. The employment channel can be said to have a stronger impact than the wage channel as indicated by the coefficients estimated through our system GMM regression analysis.