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A land of milk and honey with streets paved with gold: Do emigrants have over-optimistic expectations about incomes abroad?

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Author Info
David McKenzie () (Development Research Group, World Bank)
John Gibson (University of Waikato)
Steven Stillman (Motu Economic and Public Policy Research)

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Abstract

Millions of people emigrate every year in search of better economic and social opportunities. Anecdotal evidence suggests that emigrants may have over-optimistic expectations about the incomes they can earn abroad, resulting in excessive migration pressure, and in disappointment amongst those who do migrate. Yet there is almost no statistical evidence on how accurately these emigrants predict the incomes that they will earn working abroad. In this paper we combine a natural emigration experiment with unique survey data on would-be emigrants’ probabilistic expectations about employment and incomes in the migration destination. Our procedure enables us to obtain moments and quantiles of the subjective distribution of expected earnings in the destination country. We find a significant underestimation of both unconditional and conditional labor earnings at all points in the distribution. This under-estimation appears driven in part by potential migrants placing too much weight on the negative employment experiences of some migrants, and by inaccurate information flows from extended family, who may be trying to moderate remittance demands by understating incomes.

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Publisher Info
Paper provided by Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London in its series CReAM Discussion Paper Series with number 0709.

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Date of creation: May 2007
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Handle: RePEc:crm:wpaper:0709

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Keywords: Expectations; Migration; Natural Experiment;

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Find related papers by JEL classification:
D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
F22 - International Economics - - International Factor Movements and International Business - - - International Migration
J61 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Geographic Labor Mobility; Immigrant Workers

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Jeff Dominitz & Charles F. Manski, 1994. "Using Expectations Data to Study Subjective Income Expectations," Econometrics 9411003, EconWPA. [Downloadable!]
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  2. David McKenzie & John Gibson & Steven Stillman, 2006. "How Important is Selection? Experimental vs Non-experimental Measures of Income Gains from Migration," Working Papers in Economics 06/03, University of Waikato, Department of Economics. [Downloadable!]
  3. David McKenzie & John Gibson & Steven Stillman, 2006. "How Important Is Selection? Experimental vs. Non-Experimental Measures of the Income Gains from Migration," IZA Discussion Papers 2087, Institute for the Study of Labor (IZA). [Downloadable!]
  4. Jeff Dominitz, 1998. "Earnings Expectations, Revisions, And Realizations," The Review of Economics and Statistics, MIT Press, vol. 80(3), pages 374-388, August. [Downloadable!] (restricted)
  5. Luseno, Winnie K. & McPeak, John G. & Barrett, Christopher B. & Little, Peter D. & Gebru, Getachew, 2003. "Assessing the Value of Climate Forecast Information for Pastoralists: Evidence from Southern Ethiopia and Northern Kenya," World Development, Elsevier, vol. 31(9), pages 1477-1494, September. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Gibson, John & McKenzie, David & Rohorua, Halahingano, 2008. "How pro-poor is the selection of seasonal migrant workers from Tonga under New Zealand's recognized seasonal employer program ?," Policy Research Working Paper Series 4698, The World Bank. [Downloadable!]
  2. Catia Batista & Aitor Lacuesta & Pedro C. Vicente, 2007. "Brain Drain or Brain Gain? Micro Evidence from an African Success Story," Economics Series Working Papers 343, University of Oxford, Department of Economics. [Downloadable!]
    Other versions:
  3. Charles Bellemare & Luc Bissonnette & Sabine Kroger, 2007. "Flexible Approximation of Subjective Expectations using Probability Questions -An Application to the Investment Game-," Cahiers de recherche 0734, CIRPEE. [Downloadable!]
    Other versions:
  4. Catia Batista & Aitor Lacuesta & Pedro Vicente, 2009. "Micro evidence of the brain gain hypothesis: The case of Cape Verde," Banco de España Working Papers 0902, Banco de España. [Downloadable!]
  5. John Gibson & David McKenzie & Halahingano Rohorua, 2008. "How Pro-Poor is the Selection of Seasonal Migrant Workers from Tonga under New Zealand’s Recognised Seasonal Employer (RSE) Program?," Working Papers in Economics 08/08, University of Waikato, Department of Economics. [Downloadable!]
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