Unemployment Benefits, Risk Aversion, and Migration Incentives
AbstractWith 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 and a utility function exhibiting constant relative risk aversion is applied. The model suggests increased migration incentives independent of taste and a positive selection of risk neutral individuals. Furthermore, risk averse migrants are likely to be found in countries with more evenly distributed incomes, other things equal. While the calibration of the model shows a significant change in migration incentives, empirical results on aggregate data for South-North migration within the EU are ambiguous.
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Bibliographic InfoPaper provided by Centre for Economic Reform and Transformation, Heriot Watt University in its series CERT Discussion Papers with number 0207.
Date of creation: 2002
Date of revision:
migration; welfare benefits; risk aversion; fixed effects;
Other versions of this item:
- Axel Heitmueller, 2005. "Unemployment benefits, risk aversion, and migration incentives," Journal of Population Economics, Springer, vol. 18(1), pages 93-112, 01.
- Heitmueller, Axel, 2002. "Unemployment Benefits, Risk Aversion, and Migration Incentives," IZA Discussion Papers 610, Institute for the Study of Labor (IZA).
- J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
- J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
- J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-11-18 (All new papers)
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