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

  • 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)

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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File URL: http://www.ihs.ac.at/publications/eco/es-44.pdf
File Function: First version, 1997
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Paper provided by Institute for Advanced Studies in its series Economics Series with number 44.

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Length: 22 pages
Date of creation: Jun 1997
Date of revision:
Handle: RePEc:ihs:ihsesp:44
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  1. George J. Borjas & Bernt Bratsberg, 1994. "Who Leaves? The Outmigration of the Foreign-Born," NBER Working Papers 4913, National Bureau of Economic Research, Inc.
  2. Miles S. Kimball, 1991. "Standard Risk Aversion," NBER Technical Working Papers 0099, National Bureau of Economic Research, Inc.
  3. Pratt, John W & Zeckhauser, Richard J, 1987. "Proper Risk Aversion," Econometrica, Econometric Society, vol. 55(1), pages 143-54, January.
  4. 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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