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Purchasing-Power-Parity and the Saving Behavior of Temporary Migrants

Author

Listed:
  • Akay, Alpaslan

    () (University of Gothenburg)

  • Brausmann, Alexandra

    () (ETH Zurich)

  • Djajic, Slobodan

    () (Graduate Institute of International and Development Studies, Geneva)

  • Kirdar, Murat G.

    () (Bogazici University)

Abstract

How does saving behavior of immigrants respond to changes in purchasing power parity between the source and host countries? We examine this question by building a theoretical model of joint return-migration and saving decisions of temporary migrants and then test its implications by using data from the German Socioeconomic Panel on immigrants from 92 source countries. As implied by our theoretical model, we find that the saving rate increases in the nominal exchange rate but decreases in the source-country price level and that the absolute magnitude of both relationships increases as the time to retirement becomes shorter. At the median level of years to retirement, the absolute values of the elasticity of savings with respect to the nominal exchange rate and with respect to the source-country price level are both close to unity. Moreover, as we gradually restrict the sample to individuals with stronger return intentions, the estimated magnitudes become larger and their statistical significance higher.

Suggested Citation

  • Akay, Alpaslan & Brausmann, Alexandra & Djajic, Slobodan & Kirdar, Murat G., 2018. "Purchasing-Power-Parity and the Saving Behavior of Temporary Migrants," IZA Discussion Papers 11679, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp11679
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    References listed on IDEAS

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    More about this item

    Keywords

    migrants' savings; return migration; exchange rates; prices; PPP;

    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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