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Source Country Characteristics and Immigrants’ Migration Duration and Saving Decisions

  • Kirdar, Murat

This paper examines how immigrants' migration duration and saving decisions in the host country respond to changes in purchasing power parity (ppp) as well as in the wage ratio between the host and source countries. For this purpose, I develop a model of immigrants' joint migration duration and saving decisions and derive comparative static results regarding the impact of ppp and wage ratio on these decisions. An interesting implication of the theoretical model is that immigrants may in fact stay longer in the host country as a result of an increase in ppp, in particular those with a low degree of relative risk aversion. I test the implications of this model using a longitudinal data set that includes immigrants from four different source countries in Germany and employing panel data estimation methods. The empirical results reveal that an increase in ppp decreases the optimal migration duration. Moreover, optimal migration duration is elastic with respect to ppp. An interesting empirical finding is that, holding individual immigrant characteristics constant, immigrants from poorer source countries have a shorter migration duration than immigrants from wealthier source countries. The empirical results also reveal that ppp has a positive effect on saving rate, which is consistent with the implications of the model, and that saving rate is also elastic with respect to ppp.

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File URL: http://mpra.ub.uni-muenchen.de/13322/1/MPRA_paper_13322.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 13322.

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Date of creation: Feb 2009
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Handle: RePEc:pra:mprapa:13322
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  1. Dustmann, Christian & Kirchkamp, Oliver, 2001. "The Optimal Migration Duration and Activity Choice after Re-migration," IZA Discussion Papers 266, Institute for the Study of Labor (IZA).
  2. Galor, Oded & Stark, Oded, 1990. "Migrants' Savings, the Probability of Return Migration and Migrants' Performance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(2), pages 463-67, May.
  3. Dean Yang, 2006. "International Migration, Remittances, and Household Investment: Evidence from Philippine Migrants' Exchange Rate Shocks," NBER Working Papers 12325, National Bureau of Economic Research, Inc.
  4. Robert M. Sauer, 2004. "Educational Financing and Lifetime Earnings," Review of Economic Studies, Wiley Blackwell, vol. 71(4), pages 1189-1216, October.
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  7. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2002. "How Much Should We Trust Differences-in-Differences Estimates?," NBER Working Papers 8841, National Bureau of Economic Research, Inc.
  8. Timothy Hatton & Jeffery Williamson, 2002. "What Fundamentals Drive World Migration?," CEPR Discussion Papers 458, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  9. Doug Miller & A. Colin Cameron & Jonah B. Gelbach, 2006. "Bootstrap-Based Improvements for Inference with Clustered Errors," Working Papers 621, University of California, Davis, Department of Economics.
  10. Kumcu, M. Ercan, 1989. "The savings behavior of migrant workers : Turkish workers in W. Germany," Journal of Development Economics, Elsevier, vol. 30(2), pages 273-286, April.
  11. Bauer, Thomas K. & Sinning, Mathias, 2005. "The Savings Behavior of Temporary and Permanent Migrants in Germany," IZA Discussion Papers 1632, Institute for the Study of Labor (IZA).
  12. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-38, May.
  13. Dustmann, Christian, 1997. "Return migration, uncertainty and precautionary savings," Journal of Development Economics, Elsevier, vol. 52(2), pages 295-316, April.
  14. Guillermina Jasso & Mark Rosenzweig, 1982. "Estimating the emigration rates of legal immigrants using administrative and survey data: The 1971 cohort of immigrants to the United States," Demography, Springer, vol. 19(3), pages 279-290, August.
  15. 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.
  16. Abdurrahman Aydemir & Chris Robinson, 2006. "Global Labour Markets, Return and Onward Migration," University of Western Ontario, CIBC Centre for Human Capital and Productivity Working Papers 20061, University of Western Ontario, CIBC Centre for Human Capital and Productivity.
  17. Goeree, Jacob K. & Holt, Charles A. & Palfrey, Thomas R., 2003. "Risk averse behavior in generalized matching pennies games," Games and Economic Behavior, Elsevier, vol. 45(1), pages 97-113, October.
  18. Dustmann, Christian, 2003. "Return migration, wage differentials, and the optimal migration duration," European Economic Review, Elsevier, vol. 47(2), pages 353-369, April.
  19. Djajic, Slobodan, 1989. "Migrants in a guest-worker system : A utility maximizing approach," Journal of Development Economics, Elsevier, vol. 31(2), pages 327-339, October.
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