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Migrants' Savings, Purchasing Power Parity, and the Optimal Duration of Migration

Author

Listed:
  • Oded Stark

    (University of Oslo
    Harvard University)

  • Christian Helmenstein

    (Institute for Advanced Studies)

  • Yury Yegorov

    (University Pompeu Fabra)

Abstract

If some of the returns to migration accrue from return migration, the optimal duration of migration may be shorter than the feasible duration of migration. We develop a model that provides and highlights conditions under which return migration takes place even though a reversal of the inter-country wage differential does not occur. In particular, we consider the higher purchasing power of savings (generated from work abroad) at home than abroad as a motive for return migration. Inter alia, our model produces a negative relationship between the optimal duration of migration and the purchasing power differential and in some (but not all) cases, a negative relationship between the optimal duration of migration and the wage abroad. In addition, and contrary to our prior anticipation, our utility maximization analysis suggests that East-West migration will tend to be temporary while inter-European Community (or intra-West European) migration will likely be permanent.

Suggested Citation

  • Oded Stark & Christian Helmenstein & Yury Yegorov, 1997. "Migrants' Savings, Purchasing Power Parity, and the Optimal Duration of Migration," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 4(3), pages 307-324, July.
  • Handle: RePEc:kap:itaxpf:v:4:y:1997:i:3:d:10.1023_a:1008616421523
    DOI: 10.1023/A:1008616421523
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    References listed on IDEAS

    as
    1. Borjas, George J & Bratsberg, Bernt, 1996. "Who Leaves? The Outmigration of the Foreign-Born," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 165-176, February.
    2. Pratt, John W & Zeckhauser, Richard J, 1987. "Proper Risk Aversion," Econometrica, Econometric Society, vol. 55(1), pages 143-154, January.
    3. Kimball, Miles S, 1993. "Standard Risk Aversion," Econometrica, Econometric Society, vol. 61(3), pages 589-611, May.
    4. Oded Stark, 1991. "The Migration of Labor," Blackwell Books, Wiley Blackwell, number 1557860300, July.
    5. Stark, Oded, 1995. " Return and Dynamics: The Path of Labor Migration When Workers Differ in Their Skills and Information Is Asymmetric," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(1), pages 55-71, March.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Negative Relationship; Public Finance; Utility Maximization; Power Parity; Purchasing Power Parity;

    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

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