Migration, Family, and Risk Diversification
Posted: 7 Jan 2002
This paper proposes a formal model of migration in which workers are heterogeneous and markets are stochastically correlated. We derive and characterize the optimal migration pattern of the family. It is shown to depend on the differences in expected incomes, costs of migration, income risks, and more importantly market correlation. We show that migration can take place even when migrants earn less abroad and, more surprisingly, when earnings in the foreign country are riskier for every member of the family. Moreover, it may well be an optimal arrangement to have only dependents migrate, thus rationalizing the recent dependent-oriented migration flows from places like Hong Kong and Taiwan. We also provide some evidence in support of our theory.
Keywords: migration, risk diversification, family, dependents
JEL Classification: D81, F22
Suggested Citation: Suggested Citation