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Migratory equilibria with invested remittances

This paper analyzes international migrations when migrants invest part of their income in their origin country. This investment contributes to increase capital intensity and wages in the origin country, thus reducing the scope for migrating. We show that a non-total migratory equilibrium can exist if the foreign wage is not too high, and/or migratory and transfer costs are not too low. Exogenous shocks, such as an increase in the foreign wage, lead to an increase in optimal remittances per migrant, and a higher wage in the origin country. Yet the net effect on the equilibrium number of migrants is positive. Hence, in equilibrium, optimal remittances and number of migrants are positively related. We use data from twenty five countries from Eastern Europe and Central Asia in 2000 in order to test for this implication of our model. OLS and bootstrap estimates put forward a positive elasticity of the number of migrants with respect to remittances per migrant. Policy implications follow.

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Paper provided by ESSEC Research Center, ESSEC Business School in its series ESSEC Working Papers with number DR 09002.

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Length: 46 pages
Date of creation: Apr 2009
Date of revision:
Handle: RePEc:ebg:essewp:dr-09002
Contact details of provider: Postal: ESSEC Research Center, BP 105, 95021 Cergy, France
Web page: http://www.essec.edu/Email:


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  1. Galor, Oded, 1986. "Time preference and international labor migration," Journal of Economic Theory, Elsevier, vol. 38(1), pages 1-20, February.
  2. Samir Jahjah & Ralph Chami & Connel Fullenkamp, 2003. "Are Immigrant Remittance Flows a Source of Capital for Development," IMF Working Papers 03/189, International Monetary Fund.
  3. Giovanni Peri & Gianmarco I.P. Ottaviano, 2006. "Rethinking the Effects of Immigration on Wages," Working Papers 634, University of California, Davis, Department of Economics.
  4. Faini, Riccardo, 2006. "Remittances and the Brain Drain," IZA Discussion Papers 2155, Institute for the Study of Labor (IZA).
  5. Carrington, William J & Detragiache, Enrica & Vishwanath, Tara, 1996. "Migration with Endogenous Moving Costs," American Economic Review, American Economic Association, vol. 86(4), pages 909-30, September.
  6. Woodruff, Christopher & Zenteno, Rene, 2007. "Migration networks and microenterprises in Mexico," Journal of Development Economics, Elsevier, vol. 82(2), pages 509-528, March.
  7. Azam, Jean-Paul & Gubert, Flore, 2004. "Those in Kayes: The Impact of Remittances on their Recipients in Africa," IDEI Working Papers 308, Institut d'Économie Industrielle (IDEI), Toulouse.
  8. Stark, Oded & Wang, You Qiang, 2002. "Migration Dynamics," Economics Series 112, Institute for Advanced Studies.
  9. repec:dgr:uvatin:20050030 is not listed on IDEAS
  10. Claire Naiditch & Radu Vranceanu, 2009. "Migrant wages, remittances and recipient labour supply in a moral hazard model," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00318870, HAL.
  11. Schiff, Maurice, 2002. "Love thy neighbor: trade, migration, and social capital," European Journal of Political Economy, Elsevier, vol. 18(1), pages 87-107, March.
  12. Lucas, Robert E B, 1985. "Mines and Migrants in South Africa," American Economic Review, American Economic Association, vol. 75(5), pages 1094-1108, December.
  13. repec:cup:cbooks:9780521663731 is not listed on IDEAS
  14. Ilahi, Nadeem & Jafarey, Saqib, 1999. "Guestworker migration, remittances and the extended family: evidence from Pakistan," Journal of Development Economics, Elsevier, vol. 58(2), pages 485-512, April.
  15. Riccardo Faini, 2007. "Remittances and the Brain Drain: Do More Skilled Migrants Remit More?," World Bank Economic Review, World Bank Group, vol. 21(2), pages 177-191, May.
  16. Dimova, Ralitza & Wolff, François-Charles, 2009. "Remittances and Chain Migration: Longitudinal Evidence from Bosnia and Herzegovina," IZA Discussion Papers 4083, Institute for the Study of Labor (IZA).
  17. Card, David, 2001. "Immigrant Inflows, Native Outflows, and the Local Labor Market Impacts of Higher Immigration," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 22-64, January.
  18. Rapoport, Hillel & Docquier, Frédéric, 2005. "The Economics of Migrants’ Remittances," IZA Discussion Papers 1531, Institute for the Study of Labor (IZA).
  19. Naiditch, Claire & Vranceanu, Radu, 2009. "Migrant wages, remittances and recipient labour supply in a moral hazard model," Economic Systems, Elsevier, vol. 33(1), pages 60-82, March.
  20. Parsons, Christopher R. & Skeldon, Ronald & Walmsley, Terrie L. & Winters, L. Alan, 2007. "Quantifying international migration : a database of bilateral migrant stocks," Policy Research Working Paper Series 4165, The World Bank.
  21. repec:hal:journl:halshs-00318870 is not listed on IDEAS
  22. repec:ner:tilbur:urn:nbn:nl:ui:12-3107483 is not listed on IDEAS
  23. McCormick, Barry & Wahba, Jackline, 2004. "Return International Migration and Geographical Inequality: The Case of Egypt," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  24. Miguel León-Ledesma & Matloob Piracha, 2001. "International Migration and the Role of Remittances in Eastern Europe," Studies in Economics 0113, School of Economics, University of Kent.
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