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Migration, Family, and Risk Diversification

Listed author(s):
  • Kong-Pin Chen

    (Academia Sinica and National Taiwan University, Taiwan)

  • Shin-Hwang Chiang

    (York University, Canada)

  • Siu-Fai Leung

    (Hong Kong University of Science And Technology, Hong Kong)

This paper proposes a formal model of migration in which workers are heterogeneous and markets are stochastically correlated. We derive and characterize the optimal migration pattern of a family. It is shown to depend on differences in expected earnings, costs of migration, income risks, and more importantly market correlations. We show that migration can take place even when migrants earn less abroad and, more surprisingly, when earnings in the foreign country are riskier for every member of the family. Moreover, it may well be an optimal arrangement to have only dependents migrate, thus rationalizing the recent dependent-oriented migration flows from places like Hong Kong and Taiwan. We also provide some evidence in support of our theory.

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File URL: http://dept.econ.yorku.ca/research/workingPapers/working_papers/migr3.pdf
File Function: First version, 2002
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Paper provided by York University, Department of Economics in its series Working Papers with number 2002_01.

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Length: 39 pages
Date of creation: Jan 2002
Handle: RePEc:yca:wpaper:2002_01
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Web page: http://dept.econ.yorku.ca/

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