12 annual rural income per capita, for the model to hold empirically. Under these assumptions, _tc/ts_ =2, or migration to the city is about twice as expensive as migration to towns.<sup>27</sup> As said, there is no direct information on all migration costs in the sample. Yet, circumstantial evidence supports the notion that migrating to the city is substantially more expensive in the KHDS sample, than moving to towns. Reported one‐way transport costs, for example, are on average two times higher to the city than to the towns (47,140 TSH vs 23,346 TSH respectively) and migrants to towns are 8 percentage points more likely to have found work before moving than migrants to the city, illustrating differences in search costs. Reliance on friends and family for the first residence was also much more important for city migrants (56 percent) than for town migrants (30 percent) who were more likely to own a dwelling (32 percent versus 16 percent in cities) or have housing provided by the employer (8 percent, versus 2 percent in cities). In each case about 30 percent rented a dwelling (Christiaensen, De Weerdt, and Kanbur, 2017).

Overall, these simulations suggest substantially higher barriers for city migration, and a greater role of family and friends to overcome them, than for migration to the more proximate and familiar towns. Differences in migration costs may well play a much more important role in understanding why many migrants end up in towns than in the city, than is currently appreciated, despite higher earnings on average in the latter.<sup>28</sup> One way to empirically test this is to explore the effect of the distance from the origin to the destination on the choice of the destination. This is the topic of the next section.

# 4 Proximity Rules: Econometric Evidence

We began the paper by showing that in the KHDS panel data set, the contribution of the small town moves to overall poverty reduction was greater because there were so many more of them. But the question arises, if the typical move to a big city is so lucrative, why are there not more of them? We attributed this to “migration costs” in the broad sense, encompassing actual physical costs of transportation over distance, but also other costs associated with distance, including lack of information, uncertainty, search and settlement costs, etc. Indeed, distance has been a consistently significant factor in the literature on the econometric analysis of migration decisions.<sup>29</sup> The Kagera sample affords a unique opportunity to test the impact of distance on migration and thus to circle back to our original finding on the importance of migration to small towns in poverty reduction. The augmented H‐T model exhibited in the previous section further motivates an empirical specification to do so.

> 27 Similar city‐town migration cost ratios are found, for higher values of the city migration cost.

> 28 The effects also play in a dynamic way. As distance reduces the likelihood of a first mover, and thus the likelihood of having family and friends far away to help overcome the migration costs, the higher costs of city migration are also more likely to bind, with especially poorer and liquidity constrained households more likely to be locked out (McKenzie et al., 2010; Beegle et al., 2011; Bryan, Chowdhury, Mobarak, 2014).

> 29 The importance of distance in understanding migration patterns has been highlighted early in the literature (Sjaastadt, 1962; Schwartz, 1973), but has disappeared to the background lately, in favor of a focus on issues of selection.