Guest Workers in the Underground Economy

Guest-worker programs have been providing rapidly growing economies with millions of temporary foreign workers over the last couple of decades. With the duration of stay strictly limited by program rules in most of the host countries and wages paid to guest workers often set at sub-market levels, many of the migrants choose to overstay and seek employment in the underground economy. This paper develops a general-equilibrium model that relates the flow of guest workers transiting to the underground economy to the rules of the program, enforcement measures of the host country and market conditions facing migrants at home and abroad

Guest Worker Programs: A Theoretical Analysis of Welfare of the Host and Source Countries

This paper examines the interaction between migration policies of the host and source countries in the context of a model of guest-worker migration. For the host, the objective is to provide low-cost labor for its employers while avoiding illegal immigration. It optimizes over these objectives by setting the time limit of a guest-worker permit. The source country seeks remittance flows and return migration by offering fiscal benefits to returnees. Within this framework, we solve for the Nash equilibrium values of the migration policy instruments and compare them, to the extent possible, with the ones that emerge in a cooperative setting.Temporary Migration, Remittances, Migration Policy

International Migration of Skilled Workers with Endogenous Policies

We study the interaction between the optimal immigration policy of a host country and education policy of a source country in a model of international migration of skilled workers. Acquisition of human capital is driven by the academic and career opportunities at home and abroad. Greater opportunities to migrate are found to increase the source country’s net stock of human capital only under very stringent conditions concerning the shape of the utility function and of the production function for human capital, the country’s emigration rate, and the international wage differential. We use the model to examine the effects of technological improvements in the educational sector, changes in the academic curricula in the source country, and attitudes to immigration in the host country. Of key interest are the implications for the optimal spending on education in the source country and the optimal immigration quota of the host country

International Migration with Heterogeneous Agents: Theory and Evidence

Zwei verwirrende Fakten der internationalen Wanderung sind, dass nur ein kleiner Teil der Bevölkerung der Auswanderungsländer emigriert und dass die Migrationsquoten mit der Zeit kleiner werden. Der Beitrag untersucht dieses Phänomen unter Zuhilfenahme eines Migrationsmodells mit heterogenen Agenten für die temporäre Migration. Im Gleichgewicht existiert eine positive Relation zwischen der Anzahl der Migranten und dem Einkommensdifferential, während der Nettomigrationsfluss versiegt. Infolge dessen sind empirische Migrationsmodelle, die sich auf Nettomigrationsflüsse anstatt auf den Bestand an Migranten beziehen, missspezifiziert. Diese Vermutung scheint sich durch die empirische Untersuchung der Kointegrationsbeziehungen von Fluss- und Bestands-Migrationsmodellen zu bestätigen

Return Migration and the 'Healthy Immigrant Effect'

According to the "healthy immigrant effect" (HIE), immigrants upon arrival are healthier than locally born residents. However, this health advantage is supposed to diminish or even disappear over a relatively short period and the immigrants' health status is converging to that of the natives. The causes for this gradient of immigrants' health are subject to an ongoing discussion and the underlying trajectories are not yet fully understood. This paper investigates whether return migration can serve as an additional explanation for the declining health of immigrants, and thus aims at shedding some light on the trajectories underlying the HIE. The data used are drawn from 13 waves of the German Socio-Economic Panel. Using a random-effects probit model, this analysis explores the factors influencing re-migration by means of a sample of 4,426 migrants. In line with the existing literature, the study shows that e.g. having spouse and children in the home country, or being non-working or jobless yield a higher return probability, whereas all factors associated with attachment to Germany (e.g. language fluency, German citizenship, house ownership) reduce the probability of re-migration. Additionally, the results indicate that men reporting poorer health ('good', 'satisfactory', 'poor' or 'bad') are significantly less likely to return home relative to male immigrants who describe their health as 'very good'. However, for women, the effects are adverse to that of men, and none of the health coefficients for women is significant. Hence - at least for men - re-migration can be seen as an additional explanation for the HIE

The Asset Portfolios of Native-Born and Foreign-Born Households

This paper analyses the net worth and asset portfolios of native- and foreign-born Australian families using HILDA (wave 2) data. Specifically, we estimate a system of asset equations with an adding-up constraint imposed to control for variation in households' total net worth. Our results indicate that after accounting for differences in human capital and income levels, single immigrants have a wealth advantage of almost $185,000 relative to single native-born individuals. Although the wealth gap between mixed and native-born couples is not statistically significant, immigrant-only couples have approximately$150,000 less wealth on average than native-born couples. Relative to equally wealthy native-born couples, immigrant-only couples hold substantially more of their wealth in their homes and less in the form of vehicles and financial assets. Mixed couples, on the other hand, allocate their wealth across assets in the same way as native-born couples

Foreign aid, domestic investment and welfare

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