Migrants' Savings, Purchasing Power Parity, and the Optimal Duration of Migration
If some of the returns to migration accrue from return migration, the optimal duration of migration may be shorter than the feasible duration of migration. We develop a model that provides and highlights conditions under which return migration takes place even though a reversal of the inter-country wage differential does not occur. In particular, we consider the higher purchasing power of savings (generated from work abroad) at home than abroad as a motive for return migration. Inter alia, our model produces a negative relationship between the optimal duration of migration and the purchasing power differential and in some (but not all) cases, a negative relationship between the optimal duration of migration and the wage abroad. In addition, and contrary to our prior anticipation, our utility maximization analysis suggests that East-West migration will tend to be temporary while inter-European Community (or intra-West European) migration will likely be permanent.
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- Borjas, George J & Bratsberg, Bernt, 1996. "Who Leaves? The Outmigration of the Foreign-Born," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 165-176, February.
- Pratt, John W & Zeckhauser, Richard J, 1987. "Proper Risk Aversion," Econometrica, Econometric Society, vol. 55(1), pages 143-154, January.
- Kimball, Miles S, 1993. "Standard Risk Aversion," Econometrica, Econometric Society, vol. 61(3), pages 589-611, May.
- Stark, Oded, 1995. " Return and Dynamics: The Path of Labor Migration When Workers Differ in Their Skills and Information Is Asymmetric," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(1), pages 55-71, March.
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