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Migrants' Savings, Purchasing Power Parity, and the Optimal Duration of Migration

Author

Listed:
  • Stark, Oded

    (Department of Economics, University of Oslo)

  • Helmenstein, Christian

    (Department of Finance, Institute for Advanced Studies, Vienna)

  • Yegorov, Yuri

    (University Pompeu Fabra, Barcelona, Spain)

Abstract

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.

Suggested Citation

  • Stark, Oded & Helmenstein, Christian & Yegorov, Yuri, 1997. "Migrants' Savings, Purchasing Power Parity, and the Optimal Duration of Migration," Economics Series 44, Institute for Advanced Studies.
    • Handle: RePEc:ihs:ihsesp:44
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    File URL: https://irihs.ihs.ac.at/id/eprint/984
    File Function: First version, 1997
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    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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