Labor market outcomes, capital accumulation, and return migration: Evidence from immigrants in Germany

Kirdar, Murat (2007): Labor market outcomes, capital accumulation, and return migration: Evidence from immigrants in Germany.

Abstract

In this paper I test the capital accumulation conjecture that is used to rationalize return migration decisions in the context of immigrants in Germany and examine how labor market outcomes influence return migration decisions, with particular attention to selection in these outcomes in return migration. I characterize the level and timing of return migration as well as the selection in it and derive a number of implications of these on the impact of immigrants on the host as well as source countries. Using a rich longitudinal dataset that has an over-sampled group of immigrants (German Socioeconomic Panel), I conduct a Cox proportional hazard analysis with alternative waiting-time concepts. That the sample contains immigrants from four different source countries allows me to utilize the variation in the source country characteristics as well as the time variation in them to identify the parameters of interest. I find evidence for the savings accumulation conjecture, in which return is motivated by higher purchasing power of accumulated savings in the home country. On the other hand, human capital accumulation conjecture is rejected. In the framework of savings accumulation, I examine the impact of an increase in German earnings whose theoretical impact on the return migration decision is ambiguous. In terms of labor market outcomes, both retirement and unemployment emerge as important determinants of return migration choices. Unemployment spell length determines the direction of selection with respect to unemployment in return migration. The data also reveal that the level of return migration is high and varies considerably across the source countries. The hazard function of Turkish immigrants displays a hump-shaped profile that peaks between the ages of 45 and 54 whereas EU immigrants are more likely to return at earlier ages and after retirement.

• Item Type: MPRA Paper
• Institution: Middle East Technical University
• Language: English
• Keywords: International Migration; Capital Accumulation; Unemployment; Duration Analysis
• Subjects: F - International Economics > F2 - International Factor Movements and International Business > F22 - International Migration; C - Mathematical and Quantitative Methods > C4 - Econometric and Statistical Methods: Special Topics > C41 - Duration Analysis ; Optimal Timing Strategies; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J61 - Geographic Labor Mobility ; Immigrant Workers

References

Aydemir, A., Robinson, C., 2006. Global Labor Markets, Return and Onward Migration. Working Paper #2006-1, CIBC Working Paper Series. Bellemare, C., 2003. Economic Assimilation and Outmigration of Immigrants in West-Germany. Discussion Paper 65, Tilburg University, Center for Economic Research. Berninghaus, S., Siefer-Vogt, H.G., 1993. The Role of the Target Savings Motive in Guest Worker Migration. Journal of Economic Dynamics and Control 17, 181-205. Boersch-Supan, A., Schnabel, R., 1999. Social Security and Retirement in Germany. In: Gruber, J., Wise, D. (Eds.), Social Security and Retirement Around the World, The University of Chicago Press, Chicago, pp. 135-180. Borjas, G.J., 1994. The Economics of Immigration. Journal of Economic Literature 32, 1667-1717. Borjas, G.J., 2000. Labor Economics. McGraw-Hill. Borjas, G.J., Bratsberg, B., 1996. Who Leaves? The Outmigration of the Foreign-born. Review of Economics and Statistics 78, 165-176. Bureau of Labor Statistics, International Comparisons of Hourly Compensation Costs for Production Workers in Manufacturing, Supplementary Tables, 1975-2005. Constant, A., Massey, D., 2003. Self-Selection, Earnings, and Out-Migration: A Longitudinal Study of Immigrants to Germany. Journal of Population Economics 16, 631-653. Cox, D. R., 1972. Regression Models and Life-tables. Journal of the Royal Statistical Society, Series B 34, 187-220. Djajic, S., 1989. Migrants in a Guest-Worker System: A Utility Maximizing Approach. Journal of Development Economics 31, 327-339. Dustmann, C., 2003. Return Migration and Optimal Migration Duration. European Economic Review 47, 353-369. Dustmann, C., Kirschkamp, O., 2002. The Optimal Migration Duration and Activity Choice after Re-migration. Journal of Development Economics 67, 351-372. Freeman, R.B., Oostendorp, R., 2000. Wages Around the World: Pay Across Occupations and Countries. NBER Working Paper No. 8058. Hansen, J., Lofstrom, M., 2003. Immigrant Assimilation and Welfare Participation: Do Immigrants Assimilate Into or Out-of Welfare. Journal of Human Resources 38, 192-218. Hill, J.K., 1987. Immigrant Decisions Concerning Duration of Stay and Migration Frequency. Journal of Development Economics 25, 221-234. Jasso, G., Rosenzweig, M., 1982. Estimating the Emigration Rates of Legal Immigrants Using Administrative and Survey Data: The 1971 Cohort of Immigrants to the United States. Demography 19, 279-290. Jenkins, S.P., 2004. Survival Analysis. Unpublished manuscript, Institute for Social and Economic Research, U. of Essex, Colchester, UK. Kirdar, M.G., 2005. Return Migration and Saving Behavior of Foreign Workers in Germany. Working Paper 0506, Economic Research Center, Middle East Technical University, 2005. Klinthall, M., 1999. Greek Return Migration from Sweden 1968-1993. mimeo, Lund University. Kumcu, E.M., 1989. The Savings Behavior of Migrant Workers: Turkish Workers in W. Germany. Journal of Development Economics 30, 273-286. Lin, D.Y., Wei, L.J., 1989. The Robust Inference for the Cox Proportional Hazards Model. Journal of the American Statistical Association 84, 1074-8. Organization for Economic Development and Cooperation (OECD), 2002. OECD Indicators, Benefits and Wages. Organization for Economic Development and Cooperation (OECD), 2002. OECD Indicators, PPP. Paine, S., 1974. Exporting Workers: the Turkish case. Cambridge, Cambridge. Riphahn, R., 1998. Immigrant Participation in Social Assistance Programs. IZA Working Paper No:15. StataCorp., 2003. Stata Survival Analysis and Epidemiological Tables Reference Manual. College Station, TX. StataCorp., 2003. Stata Statistical Software: Release 8.0. College Station, TX. Storesletten, K., 2000. Sustaining Fiscal Policy Through Immigration. Journal of Political Economy 108, 300-23. Tunalı, İ., 2000. Rationality of Migration. International Economic Review 41, 893-920. Tunalı, İ., Pritchett, J., 1997. Cox Regression with Alternative Concepts of Waiting Time: The New Orleans Yellow Fever Epidemic of 1853. Journal of Applied Econometrics 12, 1-25. Wagner, G., Burkhauser, R., Behringer F., 1993. The English Language Public Use File of the German Socio-Economic Panel Study. Journal of Human Resources 28, 429-433.