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Source-country earnings and emigration

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  • Djajic, Slobodan
  • Kirdar, Murat G.
  • Vinogradova, Alexandra

Abstract

While higher wages at home reduce the incentive to emigrate by increasing the opportunity cost of working abroad, they also facilitate emigration for liquidity-constrained individuals. Our theoretical model examines the interaction between these two effects. We show that (i) the relationship between the home-country wage and emigration pressure is hump-shaped, (ii) the hump is more pronounced the lower the cost of migration, and (iii) the ratio of high to low-skilled emigrants is decreasing in the home-country wage. We test our model empirically for three different skill groups of emigrants and find strong evidence in support of the three hypotheses. The peak emigration rate for the low skilled is estimated at $4000 at 2000 PPP-adjusted prices. A rise in the annual per-capita income of the source country from $231 of the poorest economy in our sample to $4000, is associated with an increase in the emigration rate of its low-skilled workers from about 2.7% to 5.0%.

Suggested Citation

  • Djajic, Slobodan & Kirdar, Murat G. & Vinogradova, Alexandra, 2016. "Source-country earnings and emigration," Journal of International Economics, Elsevier, vol. 99(C), pages 46-67.
  • Handle: RePEc:eee:inecon:v:99:y:2016:i:c:p:46-67
    DOI: 10.1016/j.jinteco.2015.12.001
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    3. Thu Hien DAO & Frédéric DOCQUIER & Mathilde MAUREL & Pierre SCHAUS, 2017. "Global Migration in the 20th and 21st Centuries: the Unstoppable Force of Demography," Working Paper 96d89f28-0e80-4703-9b33-6, Agence française de développement.
    4. Bertoli, Simone & Moraga, Jesús Fernández-Huertas & Guichard, Lucas, 2020. "Rational inattention and migration decisions," Journal of International Economics, Elsevier, vol. 126(C).
    5. Léa Marchal & Claire Naiditch, 2020. "How Borrowing Constraints Hinder Migration: Theoretical Insights from a Random Utility Maximization Model," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(2), pages 732-761, April.
    6. Michael Clemens, 2014. "Does Development Reduce Migration? - Working Paper 359," Working Papers 359, Center for Global Development.
    7. Martínez Flores, Fernanda, 2018. "The deterrence effect of immigration enforcement in transit countries: Evidence from Central American deportees," Ruhr Economic Papers 749, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    8. Akay, Alpaslan & Brausmann, Alexandra & Djajić, Slobodan & Kırdar, Murat G., 2021. "Purchasing-power-parity and the saving behavior of temporary migrants," European Economic Review, Elsevier, vol. 134(C).
    9. Fernanda Martínez Flores, 2020. "The Effects of Enhanced Enforcement at Mexico’s Southern Border: Evidence From Central American Deportees," Demography, Springer;Population Association of America (PAA), vol. 57(5), pages 1597-1623, October.
    10. Thu Hien Dao & Frédéric Docquier & Mathilde Maurel & Pierre Schaus, 2021. "Global migration in the twentieth and twenty-first centuries: the unstoppable force of demography," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 157(2), pages 417-449, May.
    11. Michal BURZYNSKI, 2018. "Time, Space and Skill in Designing Migration Policy," JODE - Journal of Demographic Economics, Cambridge University Press, vol. 84(4), pages 355-417, December.
    12. Michel Beine, 2020. "Age, Intentions and the Implicit Role of Out-Selection Factors of International Migration," CESifo Working Paper Series 8688, CESifo.

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    More about this item

    Keywords

    Emigration; Source country earnings; Liquidity constraints; Migration costs;
    All these keywords.

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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