Servizio Comunitario di Informazione in materia di Ricerca e Sviluppo - CORDIS


DMEA Sintesi della relazione

Project ID: 323992
Finanziato nell'ambito di: FP7-IDEAS-ERC
Paese: United Kingdom

Mid-Term Report Summary - DMEA (The Dynamics of Migration and Economic Adjustment)

The goal of Project 1: “Dynamic Behaviour of Immigrants over Migration Cycle” is the development of a structural and estimable model of return migration, where individuals decide simultaneously about the optimal duration of stay in the host country, investment into human capital, labour force participation, and savings. We allow individuals to update their beliefs about the optimal migration duration in every period, taking into account changes in preferences as well as new information about economic parameters. In each period, immigrants decide whether to stay or to return to their home country, how much to consume or save, and how much to invest in human capital. The individual can be either working for a wage or be out-of-work. The model is estimated using survey and administrative data, where return migration decisions are identified from information on immigrants return intentions. The work has important implications for the way we should think about selective outmigration, as it considers explicitly the possibility that out-migration is associated with other decisions such as investments in skills. We term this type of selection “behavioural selection”.

The goal of project 2, “Immediate and Dynamic Adjustments of Native Workers”, is to understand how a large and unforeseen labour supply shock to a particular region affect native workers. We make use of a unique natural experiment that was induced by the fall of the iron curtain. In its aftermath, Germany introduced a policy that permitted workers from regions in Czechoslovakia bordering Germany to work (but not to live) in some German border districts, but not in others. The project makes a number of novel contributions, by (i) pointing out that conventional approaches as commonly used lead to misleading estimates if wage and employment responses are not modelled in conjunction and when labour supply elasticities of natives differ across demographic groups, (ii) by showing that - possibly due to lower labour supply elasticities - "outsiders" (workers who are not in work in a particular labour market when the migration shock happens) shield "insiders" of the shock, and (iii) by pointing out that composition effects through employment responses may severely affect estimates using conventional methods.

Reported by

United Kingdom