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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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  • McKenzie, David
  • Gibson, John
  • Stillman, Steven

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 among 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 the authors combine a natural emigration experiment with unique survey data on would-be emigrants'probabilistic expectations about employment and incomes in the migration destination. Their procedure enables them to obtain moments and quantiles of the subjective distribution of expected earnings in the destination country. The authors find a significant underestimation of both unconditional and conditional labor earnings at all points in the distribution. This underestimation 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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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4141.

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Date of creation: 01 Mar 2007
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Handle: RePEc:wbk:wbrwps:4141

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Keywords: Population Policies; Economic Theory&Research; Remittances; Labor Markets; Fiscal&Monetary Policy;

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  1. Parey, Matthias & Waldinger, Fabian, 2008. "Studying Abroad and the Effect on International Labor Market Mobility: Evidence from the Introduction of ERASMUS," IZA Discussion Papers 3430, Institute for the Study of Labor (IZA).
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  7. Ruth Vargas Hill, 2006. "The role of risk in shaping production decisions: an empirical analysis," Economics Series Working Papers, University of Oxford, Department of Economics GPRG-WPS-049, University of Oxford, Department of Economics.
  8. Delavande, Adeline & Gine, Xavier & McKenzie, David, 2009. "Measuring Subjective Expectations in Developing Countries: A Critical Review and New Evidence," Policy Research Working Paper Series 4824, The World Bank.
  9. Ruth Vargas Hill, 2010. "Liberalisation and Producer Price Risk: Examining Subjective Expectations in the Ugandan Coffee Market," Journal of African Economies, Centre for the Study of African Economies (CSAE), Centre for the Study of African Economies (CSAE), vol. 19(4), pages 433-458, August.
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  12. 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, University of Waikato, Department of Economics 06/03, University of Waikato, Department of Economics.
  13. Jeff Dominitz, 1998. "Earnings Expectations, Revisions, And Realizations," The Review of Economics and Statistics, MIT Press, vol. 80(3), pages 374-388, August.
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  15. 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, Elsevier, vol. 31(9), pages 1477-1494, September.
  16. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, American Economic Association, vol. 60(1), pages 126-42, March.
  17. McKenzie, David & Gibson, John & Stillman, Steven, 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).
  18. Kaivan Munshi, 2003. "Networks In The Modern Economy: Mexican Migrants In The U.S. Labor Market," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 118(2), pages 549-599, May.
  19. Joyce J. Chen, 2006. "Migration and Imperfect Monitoring: Implications for Intra-Household Allocation," American Economic Review, American Economic Association, American Economic Association, vol. 96(2), pages 227-231, May.
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  1. One evaluation, one paper? Getting more for your money
    by ? in Development Impact on 2012-01-09 04:18:17

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  1. > International Economics > International Migration
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