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Optimal Migration and Consumption Policies over an Individual's Random Lifetime

Author

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  • Willassen, Yngve

    (Dept. of Economics, University of Oslo)

Abstract

The aim of this study is to determine optimal migration policies for an individual of known age-dependent mortality who accumulates capital by compound interest and also by skill-dependent income. By a continuing choice of several environments, which vary in intrinsic preference and in the rates at which they improve and reward skills, the individual have the option of developing skills, current earnings and residential preference by moving between the environments. Specifying the expected future utility which recognizes the preference for residence as well as for consumption, the corresponding dynamic programming (DP) equations are derived. The optimality of return migration is particularly investigated by studying the movement between two environments. The analysis is then extended to allow for several environments. The DP-equations are also modified to examine the effect of monetary as well as non-monetary psychic) costs. In combining the essential causes motivating migration in a tractable dynamic control model that can be used for analysing the impacts of the various factors, this paper is believed to be an contribution to the migration literature.

Suggested Citation

  • Willassen, Yngve, 2014. "Optimal Migration and Consumption Policies over an Individual's Random Lifetime," Memorandum 01/2014, Oslo University, Department of Economics.
    • Handle: RePEc:hhs:osloec:2014_001
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    File URL: https://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2014/memo-01-2014.pdf
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    References listed on IDEAS

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    3. George J. Borjas, 1994. "The Economics of Immigration," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1667-1717, December.
    4. Amelie F. Constant & Klaus F. Zimmermann (ed.), 2013. "International Handbook on the Economics of Migration," Books, Edward Elgar Publishing, number 4026.
    5. McCall, B P & McCall, J J, 1987. "A Sequential Study of Migration and Job Search," Journal of Labor Economics, University of Chicago Press, vol. 5(4), pages 452-476, October.
    6. Tunali, Insan, 2000. "Rationality of Migration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(4), pages 893-920, November.
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    More about this item

    Keywords

    Residential preferences; development of skills; reward of human capital; optimal migration; dynamic programming;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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