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Out of Sight, Out of Mind: Migration, Entrepreneurship and Social Capital

  • Wahba, Jackline

    ()

    (University of Southampton)

  • Zenou, Yves

    ()

    (Stockholm University)

The aim of this paper is to investigate whether return migrants are more likely to become entrepreneurs than non-migrants. We develop a theoretical search model that puts forward the trade off faced by returnees since overseas migration provides an opportunity for human and physical capital accumulation but, at the same time, may lead to a loss of social capital back home. We test the predictions of the model using data from Egypt. We find that, even after controlling for the endogeneity of the temporary migration decision, an overseas returnee is more likely to become an entrepreneur than a non-migrant. Although migrants lose their original social networks whilst overseas, savings and human capital accumulation acquired abroad over-compensate for this loss. Our results also suggest that social networks have no significant impact on becoming entrepreneurs for returnees but matter for non-migrants.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4541.

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Length: 38 pages
Date of creation: Nov 2009
Date of revision:
Publication status: published in: Regional Science and Urban Economics, 2012, 42 (5), 890–903
Handle: RePEc:iza:izadps:dp4541
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  16. World Bank, 2009. "Shaping the Future : A Long-Term Perspective of People and Job Mobility in the Middle East and North Africa," World Bank Other Operational Studies 18546, The World Bank.
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  23. McCormick, Barry & Wahba, Jackline, 2001. "Overseas Work Experience, Savings and Entrepreneurship amongst Return Migrants to LDCs," Scottish Journal of Political Economy, Scottish Economic Society, vol. 48(2), pages 164-78, May.
  24. Calvo-Armengol, Antoni, 2004. "Job contact networks," Journal of Economic Theory, Elsevier, vol. 115(1), pages 191-206, March.
  25. Fonseca, Raquel & Lopez-Garcia, Paloma & Pissarides, Christopher A., 2001. "Entrepreneurship, start-up costs and employment," European Economic Review, Elsevier, vol. 45(4-6), pages 692-705, May.
  26. Alice Mesnard & Martin Ravallion, 2006. "The Wealth Effect on New Business Startups in a Developing Economy," Economica, London School of Economics and Political Science, vol. 73(291), pages 367-392, 08.
  27. Kaivan Munshi, 2003. "Networks In The Modern Economy: Mexican Migrants In The U.S. Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 118(2), pages 549-599, May.
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