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The Role of Community in Migration Dynamics


  • Sergio Vergalli

    (University of Brescia)


In this paper, we present a theoretical model that, implementing the pioneering work of Burda (1995), based on the Real Option Theory, investigates the roots of the migration dynamics. In the model the decision to migrate of each individual depends not only on the wage differential, but also on a U-shaped benefit function of a community of homogeneous ethnic individuals, modelled according to the "theory of clubs". The theoretical results are able to give an explanation to the observable "jumps" in the migration flows and to describe how the trigger for entry can change depending on the dimension of the district. The analysis of the results also sheds light on the dynamics of the districts’ development: some possible rigidities in the adjustment of the district dimension, as regards the optimal levels, could magnify the hysteresis process.

Suggested Citation

  • Sergio Vergalli, 2006. "The Role of Community in Migration Dynamics," Working Papers 2006.4, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2006.4

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    References listed on IDEAS

    1. Bauer, Thomas K. & Epstein, Gil S. & Gang, Ira N., 2002. "Herd Effects or Migration Networks? The Location Choice of Mexican Immigrants in the U.S," IZA Discussion Papers 551, Institute for the Study of Labor (IZA).
    2. Mahmudul Anam & Shin-Hwan Chiang & Lieng Hua, 2008. "Uncertainty and International Migration: An Option Cum Portfolio Model," Journal of Labor Research, Springer, vol. 29(3), pages 236-250, September.
    3. Burda, Michael C, 1995. "Migration and the Option Value of Waiting," CEPR Discussion Papers 1229, C.E.P.R. Discussion Papers.
    4. Locher, Lilo, 2001. "Testing for the Option Value of Migration," IZA Discussion Papers 405, Institute for the Study of Labor (IZA).
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    7. Epstein, Gil S & Gang, Ira, 2004. "Ethnic Networks and International Trade," CEPR Discussion Papers 4616, C.E.P.R. Discussion Papers.
    8. Edwards, John H. Y., 1992. "Indivisibility and preference for collective provision," Regional Science and Urban Economics, Elsevier, vol. 22(4), pages 559-577, November.
    9. Moretto, Michele, 2008. "Competition and irreversible investments under uncertainty," Information Economics and Policy, Elsevier, vol. 20(1), pages 75-88, March.
    10. Sandler, Todd & Tschirhart, John T, 1980. "The Economic Theory of Clubs: An Evaluative Survey," Journal of Economic Literature, American Economic Association, vol. 18(4), pages 1481-1521, December.
    11. Buchanan, James M. & Goetz, Charles J., 1972. "Efficiency limits of fiscal mobility: An assessment of the tiebout model," Journal of Public Economics, Elsevier, vol. 1(1), pages 25-43, April.
    12. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416-416.
    13. Bencivenga, Valerie R & Smith, Bruce D, 1997. "Unemployment, Migration, and Growth," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 582-608, June.
    14. Kaivan Munshi, 2003. "Networks in the Modern Economy: Mexican Migrants in the U. S. Labor Market," The Quarterly Journal of Economics, Oxford University Press, vol. 118(2), pages 549-599.
    15. Nicola Daniele Coniglio, 2004. "Migropolis: migration networks and formation of ethnic clusters in cities," ERSA conference papers ersa04p146, European Regional Science Association.
    16. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-142, March.
    17. John V. Leahy, 1993. "Investment in Competitive Equilibrium: The Optimality of Myopic Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 108(4), pages 1105-1133.
    18. Berglas, Eitan, 1976. "On the Theory of Clubs," American Economic Review, American Economic Association, vol. 66(2), pages 116-121, May.
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    Cited by:

    1. M. Moretto & Sergio Vergalli, 2008. "Migration dynamics," Journal of Economics, Springer, vol. 93(3), pages 223-265, April.
    2. Christian Schmidt, 2011. "Commuting and Migration Decisions under Cost Uncertainty," ERSA conference papers ersa10p1481, European Regional Science Association.
    3. Sergio Vergalli, 2011. "Entry and Exit Strategies in Migration Dynamics," Journal of Labor Research, Springer, vol. 32(4), pages 362-389, December.
    4. Elsner, Benjamin & Narciso, Gaia & Thijssen, Jacco J. J., 2013. "Migrant Networks and the Spread of Misinformation," IZA Discussion Papers 7863, Institute for the Study of Labor (IZA).
    5. Michele Moretto & Sergio Vergalli, 2008. "Managing Migration through Quotas: an Option-theory Perspective," Working Papers 2008.51, Fondazione Eni Enrico Mattei.
    6. Michele Moretto & Sergio Vergalli, 2010. "Managing Migration Through Conflicting Policies: An Option-Theory Perspective," Scottish Journal of Political Economy, Scottish Economic Society, vol. 57(s1), pages 318-342, July.
    7. Zakharenko, Roman, 2012. "Human capital acquisition and international migration in a model of educational market," Regional Science and Urban Economics, Elsevier, vol. 42(5), pages 808-816.
    8. repec:hur:ijaraf:v:7:y:2017:i:3:p:6-13 is not listed on IDEAS
    9. José Romero, 2013. "What circumstances lead a government to promote brain drain?," Journal of Economics, Springer, vol. 108(2), pages 173-202, March.
    10. Buonanno, Paolo & Pazzona, Matteo, 2014. "Migrating mafias," Regional Science and Urban Economics, Elsevier, vol. 44(C), pages 75-81.

    More about this item


    Migration; Real option; Theory of clubs; Network effect;

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • H49 - Public Economics - - Publicly Provided Goods - - - Other
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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