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Risk Aversion, Time Preference and Cross-border Commuting and Migration Intentions

  • Klaus Nowotny

    (WIFO)

This paper analyses the effect of individual risk aversion and time preference on cross-border commuting and migration intentions. Both the theoretical and empirical results show that the probability of being willing to migrate decreases with risk aversion, the rate of time preference, and the maximum number of periods an individual can work abroad. The probability of being willing to commute also decreases with risk aversion, but at a smaller rate compared to the willingness to migrate, while it is (largely) unaffected by intertemporal consumption preferences. The analysis helps to shed more light on the role of time preference and risk aversion as determinants of mobility decisions, which is especially important for integrating regions where both migration and commuting are possible, as in the enlarged European Union.

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Paper provided by WIFO in its series WIFO Working Papers with number 379.

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Length: 33 pages
Date of creation: 10 Sep 2010
Date of revision:
Handle: RePEc:wfo:wpaper:y:2010:i:379
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  1. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
  2. Monica Paiella & Luigi Guiso, 2004. "Risk Aversion, Wealth and Background Risk," 2004 Meeting Papers 525, Society for Economic Dynamics.
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  4. Pindyck, Robert, 1989. "Irreversibility, uncertainty, and investment," Policy Research Working Paper Series 294, The World Bank.
  5. Meier, Volker, 2000. "Time preference, international migration, and social security," Munich Reprints in Economics 19190, University of Munich, Department of Economics.
  6. Gary L. Hunt & Richard E. Mueller, 2004. "North American Migration: Returns to Skill, Border Effects, and Mobility Costs," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 988-1007, November.
  7. Luigi Ventura, 2003. "Direct Measures of Time Preference," The Economic and Social Review, Economic and Social Studies, vol. 34(3), pages 293–310.
  8. Peter Huber & Klaus Nowotny, 2008. "Moving Across Borders: Who is Willing to Migrate or to Commute?," WIFO Working Papers 322, WIFO.
  9. Heitmueller, Axel, 2002. "Unemployment Benefits, Risk Aversion, and Migration Incentives," IZA Discussion Papers 610, Institute for the Study of Labor (IZA).
  10. CRETTEZ , Bertrand & MICHEL , Philippe & VIDAL , Jean-Pierre, 1995. "Time Preference and Labour Migration in an OLG Model with Land and Capital," CORE Discussion Papers 1995046, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  11. Henk & Martin Van Der Velde, 2004. "The Power of Cross-Border Labour Market Immobility," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 95(1), pages 100-107, 02.
  12. Pedersen, Peder J. & Pytlikova, Mariola & Smith, Nina, 2008. "Selection and network effects--Migration flows into OECD countries 1990-2000," European Economic Review, Elsevier, vol. 52(7), pages 1160-1186, October.
  13. McKenzie, David & Rapoport, Hillel, 2007. "Self-selection patterns in Mexico-U.S. migration : the role of migration networks," Policy Research Working Paper Series 4118, The World Bank.
  14. Smith, Patricia K. & Bogin, Barry & Bishai, David, 2005. "Are time preference and body mass index associated?: Evidence from the National Longitudinal Survey of Youth," Economics & Human Biology, Elsevier, vol. 3(2), pages 259-270, July.
  15. Kan, Kamhon, 2003. "Residential mobility and job changes under uncertainty," Journal of Urban Economics, Elsevier, vol. 54(3), pages 566-586, November.
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  17. repec:dgr:kubcen:200860 is not listed on IDEAS
  18. Joseph Eisenhauer & Luigi Ventura, 2003. "Survey measures of risk aversion and prudence," Applied Economics, Taylor & Francis Journals, vol. 35(13), pages 1477-1484.
  19. Mahmudul Anam & Shin-Hwan Chiang & Lieng Hua, 2008. "Uncertainty and International Migration: An Option Cum Portfolio Model," Journal of Labor Research, Springer, vol. 29(3), pages 236-250, September.
  20. repec:cup:cbooks:9780521747387 is not listed on IDEAS
  21. Bartel, Ann P, 1989. "Where Do the New U.S. Immigrants Live?," Journal of Labor Economics, University of Chicago Press, vol. 7(4), pages 371-91, October.
  22. Galor, Oded, 1986. "Time preference and international labor migration," Journal of Economic Theory, Elsevier, vol. 38(1), pages 1-20, February.
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  24. Avinash Dixit, 1992. "Investment and Hysteresis," Journal of Economic Perspectives, American Economic Association, vol. 6(1), pages 107-132, Winter.
  25. Okamoto, Ryosuke, 2007. "Location choices of firms and workers in an urban model with heterogeneities in skills and preferences," Regional Science and Urban Economics, Elsevier, vol. 37(6), pages 670-687, November.
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