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Unemployment benefits, risk aversion, and migration incentives

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  • Axel Heitmueller

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Abstract

With reference to the EU enlargement, a framework is derived which allows the study of the effect of unemployment benefits on the migration decision. While benefits simply increase the expected gain for risk neutral individuals, they work as an insurance device for risk averse migrants; the results for the two groups might differ. Thus, the migration decision is reformulated as monetary lottery. Unsurprisingly, the paper finds that risk averse individuals are less likely to engage in migration. Yet, introducing unemployment benefits also makes them select a different set of countries. The implications of selection and sorting, however, depend crucially on the link between risk aversion and economically important personal characteristics. It is also shown that unemployment benefits give rise to intertemporal trade-offs in migration returns. Copyright Springer-Verlag 2005

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Bibliographic Info

Article provided by Springer in its journal Journal of Population Economics.

Volume (Year): 18 (2005)
Issue (Month): 1 (01)
Pages: 93-112

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Handle: RePEc:spr:jopoec:v:18:y:2005:i:1:p:93-112

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Related research

Keywords: J60; J61; J65; Migration; unemployment benefits; risk aversion;

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  1. Donkers, A.C.D. & Melenberg, B. & Soest, A.H.O. van, 1999. "Estimating Risk Attitudes Using Lotteries; A Large Sample Approach," Discussion Paper 1999-12, Tilburg University, Center for Economic Research.
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  5. Chiswick, Barry R, 1978. "The Effect of Americanization on the Earnings of Foreign-born Men," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 897-921, October.
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  8. Richard E. Baldwin & Joseph F. Francois & Richard Portes, 1997. "The costs and benefits of eastern enlargement: the impact on the EU and central Europe," Economic Policy, CEPR & CES & MSH, vol. 12(24), pages 125-176, 04.
  9. Michael Fertig, 2001. "The economic impact of EU-enlargement: assessing the migration potential," Empirical Economics, Springer, vol. 26(4), pages 707-720.
  10. Bird, Edward J. & Kayser, Hilke & Wagner, Gert G. & Frick, Joachim R., 1999. "The Immigrant Welfare Effect: Take-Up or Eligibility?," IZA Discussion Papers 66, Institute for the Study of Labor (IZA).
  11. Fertig, Michael & Schmidt, Christoph M., 2000. "Aggregate-Level Migration Studies as a Tool for Forecasting Future Migration Streams," IZA Discussion Papers 183, Institute for the Study of Labor (IZA).
  12. Borjas, George J, 1999. "Immigration and Welfare Magnets," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 607-37, October.
  13. Siegfried Berninghaus & Hans G√ľnther Seifert-Vogt, 1987. "International Migration under Incomplete Information," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 123(II), pages 199-218, June.
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