FEEM working papers "Note di lavoro" series
2006 .123

Entry and Exit Strategies in Migration Dynamics


Authors: Sergio Vergalli
Series: Economy and Society
Editor: Gianmarco I.P. Ottaviano
Type: Journal
Keywords: Migration,Real Option,Theory of Clubs,Network Effect
JEL n.: F22,H49,O15,R23
JEL: Journal of Economics
Pages: Volume 93, Issue 3, pp. 223-265
Date: 04/2008

Abstract

This work is devoted to study the role of combined entry and exit strategies in the migration process. We develop a real option model in which the community of immigrants in the host country is described as a club and the immigrants benefits is a U-shaped function, depending on the dimension of the district. There exist two threshold levels: the first one triggers the migration choice, while the second triggers the return to the country of origin. The theoretical results show that the phenomenon of hysteresis is amplified by the existence of a community both in the entry case and in the exit case. Furthermore, the community can reduce the minimum wage level required to trigger both exit and entry: this fact could explain why in some cases we observe migration inflows with a low wage differential and also with underunemployment. We show also some possible further extensions of the model: in one case we introduce a possible way to select the entrants. skills and in another case we show some theoretical implementations to include possible policy shocks in the migrant’s choice.

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