Migrants' Savings, Purchasing Power Parity, and the Optimal Duration of Migration

Oded Stark, Christian Helmenstein, Yury Yegorov

Research output: Contribution to journalArticlepeer-review

Abstract

If some of the returns to migration accrue from return migration, the optimal duration of migration may be shorter than the feasible duration of migration. We develop a model that provides and highlights conditions under which return migration takes place even though a reversal of the inter-country wage differential does not occur. In particular, we consider the higher purchasing power of savings (generated from work abroad) at home than abroad as a motive for return migration. Inter alia, our model produces a negative relationship between the optimal duration of migration and the purchasing power differential and in some (but not all) cases, a negative relationship between the optimal duration of migration and the wage abroad. In addition, and contrary to our prior anticipation, our utility maximization analysis suggests that East-West migration will tend to be temporary while inter-European Community (or intra-West European) migration will likely be permanent.

Original languageEnglish
Pages (from-to)307-324
Number of pages18
JournalInternational Tax and Public Finance
Volume4
Issue number3
DOIs
StatePublished - 1997
Externally publishedYes

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