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

  • David McKenzie


    (Development Research Group, World Bank)

  • John Gibson


    (University of Waikato)

  • Steven Stillman


    (Motu Economic and Public Policy Research)

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 amongst 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 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 a significant underestimation of both unconditional and conditional labor earnings at all points in the distribution. This under-estimation 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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Paper provided by Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London in its series CReAM Discussion Paper Series with number 0709.

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Date of creation: May 2007
Date of revision:
Handle: RePEc:crm:wpaper:0709
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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. Omar Mahmoud, Toman & Trebesch, Christoph, 2010. "The economics of human trafficking and labour migration: Micro-evidence from Eastern Europe," Munich Reprints in Economics 19321, University of Munich, Department of Economics.
  3. Gibson, John & McKenzie, David, 2010. "The Economic Consequences of "Brain Drain" of the Best and Brightest: Microeconomic Evidence from Five Countries," IZA Discussion Papers 5124, Institute for the Study of Labor (IZA).
  4. Orazio P. Attanasio, 2009. "Expectations and Perceptions in Developing Countries: Their Measurement and Their Use," American Economic Review, American Economic Association, vol. 99(2), pages 87-92, May.
  5. David McKenzie & Steven Stillman & John Gibson, 2010. "How Important is Selection? Experimental VS. Non‐Experimental Measures of the Income Gains from Migration," Journal of the European Economic Association, European Economic Association, vol. 8(4), pages 913-945, 06.
  6. Orazio Attanasio & Katja Kaufmann, 2009. "Educational Choices, Subjective Expectations, and Credit Constraints," NBER Working Papers 15087, National Bureau of Economic Research, Inc.
  7. 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.
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  12. Jeff Dominitz & Charles F. Manski, 1994. "Using Expectations Data to Study Subjective Income Expectations," Econometrics 9411003, EconWPA.
  13. 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.
  14. Ruth Vargas Hill, 2006. "The role of risk in shaping production decisions: an empirical analysis," Economics Series Working Papers GPRG-WPS-049, University of Oxford, Department of Economics.
  15. Atila Abdulkadiroglu & Joshua Angrist & Susan Dynarski & Thomas J. Kane & Parag Pathak, 2009. "Accountability and Flexibility in Public Schools: Evidence from Boston's Charters and Pilots," NBER Working Papers 15549, National Bureau of Economic Research, Inc.
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  17. repec:tpr:qjecon:v:118:y:2003:i:2:p:549-599 is not listed on IDEAS
  18. Joyce J. Chen, 2006. "Migration and Imperfect Monitoring: Implications for Intra-Household Allocation," American Economic Review, American Economic Association, vol. 96(2), pages 227-231, May.
  19. 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.
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