Migration and Regional Income Divergence: Evidence from Korea

Rapid urbanization and the resulting concentration of economic activity pose a growing challenge to sustainable regional development. In this paper, we examine how the spatial distribution of population shapes regional income dynamics in Korea, one of the most spatially concentrated economies. We develop a spatial dynamic stochastic general equilibrium (DSGE) model incorporating endogenous total factor productivity (TFP) growth and forward-looking migration decisions. Calibrating the model to seven Korean economic areas over 1995–2023, we decompose the observed breakdown of regional income convergence into the contributions of migration, capital accumulation, and TFP. We find that migration’s contribution reversed from supporting convergence to driving divergence in the mid-2000s, following an earlier reversal in TFP’s own contribution. Capital accumulation, by contrast, shifted toward supporting convergence over the same period, offsetting the divergence driven by migration and productivity. These findings suggest that policies narrowing regional productivity disparities may be better positioned to address spatial polarization than those targeting population mobility alone, underscoring the importance of productivity-based interventions for sustainable regional development.