International Migration with Heterogeneous Agents: Theory and Evidence

38 Pages Posted: 30 Mar 2006

See all articles by Herbert Brücker

Herbert Brücker

German Institute for Economic Research (DIW Berlin); IZA Institute of Labor Economics

Philipp J. H. Schröder

Aarhus University - School of Business and Social Sciences

Date Written: March 2006

Abstract

International migration is characterized by two puzzling facts: First, only a small share of the population tends to migrate although substantial and persisting income differences across countries exist. Second, net migration rates tend to cease over time despite persisting income differences. This paper addresses these issues in a migration model with heterogeneous agents that features temporary migration. In equilibrium a positive relation exists between the stock of migrants and the income differential, while the net migration flow becomes zero. Consequently, existing empirical migration models, estimating net migration flows instead of stocks, may be misspecified. This suspicion appears to be confirmed by our empirical investigation of the cointegration relationships of German migration stocks and flows since 1967. We find that (i) panel-unit root tests reject the hypothesis that migration flows and the explanatory variables are integrated of the same order, while migration stocks and the explanatory variables are all I(1) variables, and (ii) the hypothesis of cointegration cannot be rejected for the stock model.

Keywords: international migration, temporary migration, panel cointegration

JEL Classification: F22, C23, C53

Suggested Citation

Brücker, Herbert and Schröder, Philipp J. H., International Migration with Heterogeneous Agents: Theory and Evidence (March 2006). IZA Discussion Paper No. 2049, Available at SSRN: https://ssrn.com/abstract=894063 or http://dx.doi.org/10.2139/ssrn.894063

Herbert Brücker (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

IZA Institute of Labor Economics

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

Philipp J. H. Schröder

Aarhus University - School of Business and Social Sciences ( email )

Haslegaardsvej 10
DK-8210 Aarhus, 8210
Denmark

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