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A land of milk and honey with streets paved with gold: Do emigrants have over-optimistic expectations about incomes abroad?

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

Millions of people emigrate every year in search of better opportunities. Anecdotes of emigrants with over-optimistic expectations about the incomes they can earn abroad suggest excessive migration pressure. Yet there is almost no statistical evidence on how accurately emigrants predict the incomes that they will earn working abroad. In this paper, we combine a natural emigration experiment with unique survey data on would-be emigrants' probabilistic expectations about employment and incomes in the migration destination. Our procedure enables us to obtain moments and quantiles of the subjective distribution of expected earnings in the destination country. We find significant under-estimation of both unconditional and conditional labor earnings at all points in the distribution for males, but reasonably accurate expectations for females. This under-estimation appears driven in part by inaccurate information flows from extended family, by basing expectations on older cohorts, and by differences in the gender wage premium between source and origin countries.

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Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 102 (2013)
Issue (Month): C ()
Pages: 116-127

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Handle: RePEc:eee:deveco:v:102:y:2013:i:c:p:116-127
Contact details of provider: Web page: http://www.elsevier.com/locate/devec

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  1. 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, vol. 31(9), pages 1477-1494, September.
  2. 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).
  3. 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), vol. 19(4), pages 433-458, August.
  4. Omar Mahmoud, Toman & Trebesch, Christoph, 2010. "The economics of human trafficking and labour migration: Micro-evidence from Eastern Europe," Journal of Comparative Economics, Elsevier, vol. 38(2), pages 173-188, June.
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  7. Jeff Dominitz & Charles F. Manski, 1994. "Using Expectations Data to Study Subjective Income Expectations," Econometrics 9411003, EconWPA.
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  12. Matthias Parey & Fabian Waldinger, 2011. "Studying Abroad and the Effect on International Labour Market Mobility: Evidence from the Introduction of ERASMUS," Economic Journal, Royal Economic Society, vol. 121(551), pages 194-222, March.
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  15. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-42, March.
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  17. 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 06/03, University of Waikato, Department of Economics.
  18. Orazio Attanasio & Katja Kaufmann, 2009. "Educational Choices, Subjective Expectations, and Credit Constraints," NBER Working Papers 15087, National Bureau of Economic Research, Inc.
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