Purchasing-Power-Parity and the Saving Behavior of Temporary Migrants

75 Pages Posted: 20 Aug 2018

See all articles by Alpaslan Akay

Alpaslan Akay

IZA Institute of Labor Economics

Alexandra Brausmann

ETH Zürich

Slobodan Djajic

University of Geneva

Murat G. Kïrdar

Middle East Technical University (METU) - Department of Economics; Bogazici University - Department of Economics

Abstract

How does saving behavior of immigrants respond to changes in purchasing power parity between the source and host countries? We examine this question by building a theoretical model of joint return-migration and saving decisions of temporary migrants and then test its implications by using data from the German Socioeconomic Panel on immigrants from 92 source countries.As implied by our theoretical model, we find that the saving rate increases in the nominal exchange rate but decreases in the source-country price level and that the absolute magnitude of both relationships increases as the time to retirement becomes shorter. At the median level of years to retirement, the absolute values of the elasticity of savings with respect to the nominal exchange rate and with respect to the source-country price level are both close to unity. Moreover, as we gradually restrict the sample to individuals with stronger return intentions, the estimated magnitudes become larger and their statistical significance higher.

Keywords: migrants' savings, return migration, exchange rates, prices, PPP

JEL Classification: F22, J61

Suggested Citation

Akay, Alpaslan and Brausmann, Alexandra and Djajic, Slobodan and Kirdar, Murat G., Purchasing-Power-Parity and the Saving Behavior of Temporary Migrants. IZA Discussion Paper No. 11679, Available at SSRN: https://ssrn.com/abstract=3234202

Alpaslan Akay (Contact Author)

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Alexandra Brausmann

ETH Zürich

Rämistrasse 101
ZUE F7
Zürich, 8092
Switzerland

Slobodan Djajic

University of Geneva ( email )

32 rue de Lausanne
CH-1202 Geneva
Switzerland
0041-22-733 3049 (Fax)

Murat G. Kirdar

Middle East Technical University (METU) - Department of Economics ( email )

Inonu Bulvari
Ankara
Turkey

Bogazici University - Department of Economics ( email )

Natuk Birkan Building
Bebek
Istanbul, 34342
Turkey

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