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Unemployment Benefits, Risk Aversion, and Migration Incentives

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Author Info

  • Heitmueller, Axel

    ()
    (Cabinet Office, UK)

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 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 rather ambiguous.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 610.

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Length: 35 pages
Date of creation: Oct 2002
Date of revision:
Publication status: published in: Journal of Population Economics, 2005, 18(1), 93-112
Handle: RePEc:iza:izadps:dp610

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Related research

Keywords: welfare benefits; migration; risk aversion; fixed effects;

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References

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  1. 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.
  2. Molho, Ian, 1986. "Theories of Migration: A Review," Scottish Journal of Political Economy, Scottish Economic Society, vol. 33(4), pages 396-419, November.
  3. Levy, Mildred B & Wadycki, Walter J, 1973. "The Influence of Family and Friends on Geographic Labor Mobility: An International Comparison," The Review of Economics and Statistics, MIT Press, vol. 55(2), pages 198-203, May.
  4. 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).
  5. Borjas, George J, 1999. "Immigration and Welfare Magnets," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 607-37, October.
  6. 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.
  7. 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.
  8. Michael Fertig, 2001. "The economic impact of EU-enlargement: assessing the migration potential," Empirical Economics, Springer, vol. 26(4), pages 707-720.
  9. Donkers, Bas & Melenberg, Bertrand & Van Soest, Arthur, 2001. " Estimating Risk Attitudes Using Lotteries: A Large Sample Approach," Journal of Risk and Uncertainty, Springer, vol. 22(2), pages 165-95, March.
  10. Fertig, Michael & Schmidt, Christoph M., 2001. "First- and Second-Generation Migrants in Germany - What Do We Know and What Do People Think," IZA Discussion Papers 286, Institute for the Study of Labor (IZA).
  11. Bird, Edward J. & Kayser, Hilke & Frick, Joachim R. & Wagner, Gert G., 1999. "The Immigrant Welfare Effect: Take-Up or Eligibility?," IZA Discussion Papers 66, Institute for the Study of Labor (IZA).
  12. Bauer, Thomas K. & Zimmermann, Klaus F., 1999. "Report No. 3: Assessment of Possible Migration Pressure and its Labour Market Impact Following EU Enlargement to Central and Eastern Europe," IZA Research Reports 3, Institute for the Study of Labor (IZA).
  13. Rotte, Ralph & Vogler, Michael, 1999. "The Effects of Development on Migration: Theoretical Issues and New Empirical Evidence," IZA Discussion Papers 46, Institute for the Study of Labor (IZA).
  14. McCall, B P & McCall, J J, 1987. "A Sequential Study of Migration and Job Search," Journal of Labor Economics, University of Chicago Press, vol. 5(4), pages 452-76, October.
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