Testing for the Option Value of Migration
AbstractUsing uncertainty about the future returns to migration, the option value theory of migration can explain low migration rates in spite of huge wage differences. This paper presents the theory in a simple two-period framework and uses ethnic Germans in the CIS to find empirical support for it. Since July 1990, ethnic German immigration from Eastern Europe and the CIS is restricted by means of a protracted application mechanism. In our data on ethnic Germans in Russia and Kazakhstan in the 1990s, we use information on the stage of the application process, migration intentions and ethnicity to construct close proxies for the option value of postponing migration and for migration costs. The link between the two is shown to be as theory predicts.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 405.
Length: 20 pages
Date of creation: Nov 2001
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Find related papers by JEL classification:
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
- J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-12-14 (All new papers)
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