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Testing for the Option Value of Migration

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  • Locher, Lilo

    () (Federal Monopoly Commission, Bonn)

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    Abstract

    Using 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 Info

    Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 405.

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    Length: 20 pages
    Date of creation: Nov 2001
    Date of revision:
    Handle: RePEc:iza:izadps:dp405

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    Related research

    Keywords: Migration; option theory; ethnic Germans;

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    References

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    1. Burda, Michael C. & Härdle, Wolfgang & Müller, Marlene & Werwatz, Axel, 1997. "Semiparametric analysis of German East-West migration intentions: Facts and theory," SFB 373 Discussion Papers 1998,3, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    2. repec:wop:humbsf:1998-3 is not listed on IDEAS
    3. Locher, Lilo, 2001. "The Determination of a Migration Wave Using Ethnicity and Community Ties," IZA Discussion Papers 346, Institute for the Study of Labor (IZA).
    4. Burda, Michael C., 1993. "The determinants of East-West German migration: Some first results," European Economic Review, Elsevier, vol. 37(2-3), pages 452-461, April.
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    Cited by:
    1. Isilda Mara & Michael Landesmann, 2013. "The steadiness of migration plans and expected length of stay: based on a recent survey of Romanian migrants in Italy," Norface Discussion Paper Series 2013007, Norface Research Programme on Migration, Department of Economics, University College London.
    2. Sergio Vergalli, 2008. "The Role of Community in Migration Dynamics," LABOUR, CEIS, vol. 22(3), pages 547-567, 09.
    3. Sergio Vergalli, 2006. "Dynamics in Immigration Community," Working Papers ubs0613, University of Brescia, Department of Economics.

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