Testing for the Option Value of Migration
Published By: IZA on eSS | Published Date: November, 12 , 2001Using uncertainty about the future returns to migration, the option value theory of migration
can explain low migration rates in spite of huge wage differences. This paper presents the
theory in a simple two-period framework and uses ethnic Germans in the CIS to find
empirical support for it. Since July 1990, ethnic German immigration from Eastern Europe
and the CIS is restricted by means of a protracted application mechanism. In our data on
ethnic Germans in Russia and Kazakhstan in the 1990s, we use information on the stage of
the application process, migration intentions and ethnicity to construct close proxies for the
option value of postponing migration and for migration costs. The link between the two is
shown to be as theory predicts. [IZA Discussion Paper No. 405]
Author(s): Lilo Locher | Posted on: Aug 12, 2010 | Views(1121) | Download (747)