International labor migration, asymmetric information and occupational choice

Kar, Saibal (2009): International labor migration, asymmetric information and occupational choice. Published in: Trade and Development Review , Vol. 2, No. 1 (April 2009): pp. 34-48.

Abstract

We study the effect of asymmetric information in the labor market of a country on the occupational choice pattern of immigrants vis-à-vis natives. The choice is limited to self-employment and paid employment. The study is motivated by empirical observations that regular and irregular immigrants in many countries are often over-represented in entrepreneurship/small business despite substantial initial disadvantages. There are also evidences that the immigrants catch up with the native income level within one and half decades of their presence in the foreign land. We try to identify the reasons and provide a formal explanation of how the initial disadvantage turns out to be a prospect in disguise. In particular, we show that a larger number of skilled workers from a mixed cohort of immigrants tend to take up riskier self-employment compared to skilled natives. This explains a higher average income with high temporal income variability for the immigrant group, with consequent implications for income convergence.

• Item Type: MPRA Paper
• Language: English
• Keywords: Asymmetric Information, Labor migration, Self-employment, Risk premium, Income variability
• Subjects: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J61 - Geographic Labor Mobility ; Immigrant Workers; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism Design; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J23 - Labor Demand

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