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International Remittances and Residents' Labour Supply in a Signaling Model

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Abstract

This paper analyzes the impact of remittances sent by altruistic migrants on the labor supply of residents. The model is cast as a two-period game with asymmetric information about the residents' real economic situation. The optimal transfer depends on wages of both the donor and the recipient. Residents subject to a good economic situation may behave as if they were in a poor economic situation only in order to manipulate remitters' expectations. The latter, being aware of this risk, reduce the transferred amount accordingly. Therefore, in the equilibrium, residents who really are victims of the bad economic outlook, are penalized as compared to the perfect information set-up. In some circumstances, they can signal their type by drastically cutting working hours, thus further enhancing their precarity

Suggested Citation

  • Naiditch, Claire & Vranceanu, Radu, 2007. "International Remittances and Residents' Labour Supply in a Signaling Model," ESSEC Working Papers DR 07001, ESSEC Research Center, ESSEC Business School.
  • Handle: RePEc:ebg:essewp:dr-07001
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    Keywords

    Altruism; Development; International Economics; Labor Economics; Labor Supply; Migrants; Perfect Bayesian Equilibrium; Signaling;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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