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http://ssrn.com/abstract=964803
 
 

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A Land of Milk and Honey with Streets Paved with Gold: Do Emigrants have Over-Optimistic Expectations about Incomes Abroad?


David McKenzie


World Bank - Development Research Group (DECRG); Institute for the Study of Labor (IZA)

John Gibson


University of Waikato; Motu Economic and Public Policy Research

Steven Stillman


University of Otago; Institute for the Study of Labor (IZA)

May 2007

World Bank Policy Research Working Paper No. 4141
IZA Discussion Paper No. 2788

Abstract:     
Millions of people emigrate every year in search of better economic and social opportunities. Anecdotal evidence suggests that emigrants may have over-optimistic expectations about the incomes they can earn abroad, resulting in excessive migration pressure, and in disappointment among those who do migrate. Yet there is almost no statistical evidence on how accurately these emigrants predict the incomes that they will earn working abroad. In this paper the authors combine a natural emigration experiment with unique survey data on would-be emigrants' probabilistic expectations about employment and incomes in the migration destination. Their procedure enables them to obtain moments and quantiles of the subjective distribution of expected earnings in the destination country. The authors find a significant underestimation of both unconditional and conditional labor earnings at all points in the distribution. This underestimation appears driven in part by potential migrants placing too much weight on the negative employment experiences of some migrants, and by inaccurate information flows from extended family, who may be trying to moderate remittance demands by understating incomes.

Number of Pages in PDF File: 42

Keywords: Population Policies, Economic Theory & Research, Remittances, Labor Markets, Fiscal & Monetary Policy

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Date posted: February 23, 2007  

Suggested Citation

McKenzie, David and Gibson, John and Stillman, Steven, A Land of Milk and Honey with Streets Paved with Gold: Do Emigrants have Over-Optimistic Expectations about Incomes Abroad? (May 2007). World Bank Policy Research Working Paper No. 4141; IZA Discussion Paper No. 2788. Available at SSRN: http://ssrn.com/abstract=964803

Contact Information

David John McKenzie (Contact Author)
World Bank - Development Research Group (DECRG) ( email )
1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
John Gibson
University of Waikato ( email )
Te Raupapa
Private Bag 3105
Hamilton
New Zealand
Motu Economic and Public Policy Research
19 Milne Terrace
Island Bay
Wellington, 6002
New Zealand
Steven Stillman
University of Otago ( email )
PO Box 56
Dunedin
New Zealand
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
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