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Purchasing-Power-Parity and the Saving Behavior of Temporary Migrants

Author

Listed:
  • Alpaslan Akay

    (University of Gothenburg)

  • Alexandra Brausmann

    (3Center of Economic Research, ETH)

  • Slobodan Djajic

    (The Graduate Institute, Geneva)

  • Murat G. Kirdar

    (Department of Economics Bogazici University)

Abstract

How does the saving behavior of immigrants respond to changes in purchasing power parity between the source and host countries? We examine this question by building a theoretical model of joint return-migration and saving decisions of temporary migrants and then test its implications by using data from the German Socioeconomic Panel on immigrants from 92 source countries. As implied by our theoretical model, we find that the saving rate increases in the price of host- in terms of source-country currency, but decreases in the source-country price level and that the absolute magnitude of both relationships increases as the time to retirement becomes shorter. At the median level of years to retirement, the absolute values of the elasticity of savings with respect to the nominal exchange rate and with respect to the source-country price level are both close to unity. Moreover, as we gradually restrict the sample to individuals with stronger return intentions, the estimated magnitudes become larger and their stastical significance higher.

Suggested Citation

  • Alpaslan Akay & Alexandra Brausmann & Slobodan Djajic & Murat G. Kirdar, 2019. "Purchasing-Power-Parity and the Saving Behavior of Temporary Migrants," RFBerlin Discussion Paper Series 1916, ROCKWOOL Foundation Berlin (RFBerlin).
    • Handle: RePEc:crm:wpaper:1916
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    Cited by:

    1. Bossavie, Laurent & Görlach, Joseph-Simon & Özden, Çaglar & Wang, He, 2025. "Temporary migration for long-term investment," Journal of Development Economics, Elsevier, vol. 174(C).
    2. Jabbie, Mohamed & Jackson, Emerson Abraham, 2020. "On the Validity of Purchasing Power Parity (PPP): The Case of Sierra Leone," MPRA Paper 110659, University Library of Munich, Germany, revised 05 Jun 2020.

    More about this item

    Keywords

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    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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