Direct Evidence on Risk Attitudes and Migration

32 Pages Posted: 13 Mar 2007

See all articles by David A. Jaeger

David A. Jaeger

Ph.D. Program in Economics, City University of New York Graduate Center; National Bureau of Economic Research (NBER); University of Cologne - Department of Economics; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute); University College London - CReAM - Centre for Research and Analysis of Migration

Holger Bonin

IZA Institute of Labor Economics; ZEW – Leibniz Centre for European Economic Research

Thomas J. Dohmen

Institute for the Study of Labor (IZA); Maastricht University - Business Investment Research Center (BIRC)

Armin Falk

briq - Institute on Behavior & Inequality

David Huffman

IZA Institute of Labor Economics; Swarthmore College

Uwe Sunde

Ludwig Maximilian University of Munich

Date Written: March 2007

Abstract

Geographic mobility is important for the functioning of labor markets because it brings labor resources to where they can be most efficiently used. It has long been hypothesized that individuals' migration propensities depend on their attitudes towards risk, but the empirical evidence, to the extent that it exists, has been indirect. In this paper, we use newly available data from the German Socio-Economic Panel to measure directly the relationship between migration propensities and attitudes towards risk. We find that individuals who are more willing to take risks are more likely to migrate between labor markets in Germany. This result is robust to stratifying by age, sex, education, national origin, and a variety of other demographic characteristics, as well as to the level of aggregation used to define geographic mobility. The effect is substantial relative to the unconditional migration propensity and compared to the conventional determinants of migration. We also find that being more willing to take risks is more important for the extensive than for the intensive margin of migration.

Keywords: risk aversion, migration, Germany

JEL Classification: J61, D81, R23

Suggested Citation

Jaeger, David A. and Bonin, Holger and Dohmen, Thomas and Falk, Armin and Huffman, David and Sunde, Uwe, Direct Evidence on Risk Attitudes and Migration (March 2007). IZA Discussion Paper No. 2655. Available at SSRN: https://ssrn.com/abstract=970501

David A. Jaeger (Contact Author)

Ph.D. Program in Economics, City University of New York Graduate Center ( email )

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Holger Bonin

IZA Institute of Labor Economics ( email )

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Thomas Dohmen

Institute for the Study of Labor (IZA) ( email )

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Armin Falk

briq - Institute on Behavior & Inequality

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David Huffman

IZA Institute of Labor Economics ( email )

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Germany

Swarthmore College

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Swarthmore, PA 19081
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Uwe Sunde

Ludwig Maximilian University of Munich ( email )

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Munich, Bavaria 80539
Germany

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