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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. Guiso, Luigi & Paiella, Monica, 2001. "Risk Aversion, Wealth and Background Risk," CEPR Discussion Papers 2728, C.E.P.R. Discussion Papers.
  2. Peter Huber & Klaus Nowotny, 2008. "Moving Across Borders: Who is Willing to Migrate or to Commute?," WIFO Working Papers 322, WIFO.
  3. Pindyck, Robert S, 1991. "Irreversibility, Uncertainty, and Investment," Journal of Economic Literature, American Economic Association, vol. 29(3), pages 1110-48, September.
  4. 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.
  5. Trostel, Philip A & Taylor, Grant A, 2001. "A Theory of Time Preference," Economic Inquiry, Western Economic Association International, vol. 39(3), pages 379-95, July.
  6. Jean-Pierre Vidal & Philippe Michel & Bertrand Crettez, 1996. "Time preference and labour migration in an OLG model with land and capital," Journal of Population Economics, Springer, vol. 9(4), pages 387-403.
  7. 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.
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  9. Joseph Eisenhauer & Luigi Ventura, 2003. "Survey measures of risk aversion and prudence," Applied Economics, Taylor & Francis Journals, vol. 35(13), pages 1477-1484.
  10. Volker Meier, 2000. "Time preference, international migration, and social security," Journal of Population Economics, Springer, vol. 13(1), pages 127-146.
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  14. Luigi Ventura, 2003. "Direct Measures of Time Preference," The Economic and Social Review, Economic and Social Studies, vol. 34(3), pages 293–310.
  15. 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.
  16. 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.
  17. 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.
  18. David McKenzie & Hillel Rapoport, 2007. "Self-selection patterns in Mexico-U.S. migration: The role of migration networks," CReAM Discussion Paper Series 0701, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  19. 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.
  20. 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.
  21. Galor, Oded, 1986. "Time preference and international labor migration," Journal of Economic Theory, Elsevier, vol. 38(1), pages 1-20, February.
  22. Avinash Dixit, 1992. "Investment and Hysteresis," Journal of Economic Perspectives, American Economic Association, vol. 6(1), pages 107-132, Winter.
  23. Kan, Kamhon, 2003. "Residential mobility and job changes under uncertainty," Journal of Urban Economics, Elsevier, vol. 54(3), pages 566-586, November.
  24. 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.
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