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Unemployment Benefits, Risk Aversion, and Migration Incentives

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  • Heitmueller, Axel

    (Imperial College London)

Abstract

With reference to the EU enlargement, a framework is derived which allows the study of the effect of unemployment benefits on the migration decision. While benefits simply increase the expected gain for risk neutral individuals, they work as an insurance device for risk averse migrants; the results for the two groups might differ. Thus, the migration decision is reformulated as monetary lottery and a utility function exhibiting constant relative risk aversion is applied. The model suggests increased migration incentives independent of taste and a positive selection of risk neutral individuals. Furthermore, risk averse migrants are likely to be found in countries with more evenly distributed incomes, other things equal. While the calibration of the model shows a significant change in migration incentives, empirical results on aggregate data for South-North migration within the EU are rather ambiguous.

Suggested Citation

  • Heitmueller, Axel, 2002. "Unemployment Benefits, Risk Aversion, and Migration Incentives," IZA Discussion Papers 610, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp610
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    References listed on IDEAS

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    More about this item

    Keywords

    welfare benefits; migration; risk aversion; fixed effects;
    All these keywords.

    JEL classification:

    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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