European Migration Policies: The Effect of Uncertainty

Abstract

In our article we study how uncertainty affects migration choice and how networks are able to mitigate its effects. In particular, we describe a real option model where the migration choice depends on both the wage differential between the host country and the country of origin, and on a network of homogeneous immigrants. By looking at the labour market uncertainty, the optimal migration decision of an individual consists of waiting to migrate in a (coordinated) mass of individuals. By looking at policy uncertainty, we try to explain if it is better for the government to tighten or relax limits for immigrants in order to control migration inflows. Our results show that promoting uncertainty over migration limit may improve the government's control on migration inflows (quotas). In particular, we show that if the government controls the information related to the immigration stock it could delay the mass entry of immigrants, maintaining the required stock in the long run and controlling the flows in the short-run. Therefore, if the government's aim is to delay and/or control entry migration waves, it could control the uncertainty on the information related to the immigration quota.

Keywords: Immigration, Real Option, Quota

JEL Classification: J2, J61