Frontier Issues in International Migration

Abstract

Drawing on the general assumption that information is imperfect, this article addresses three main issues. First, why do some migrants return even though the intercountry wage differential does not reverse? And who returns? Second, why do migrants who stay tend to share their higher earnings with others at origin, even in the absence of altruism or of a need to establish an exchange relationship? And can the size of these transfers be predicted? Third, what explains the earnings of migrants? Why do they often dominate the earnings of equivalent native-born workers even if differences in human capital are fully controlled for? The article suggests these answers. First, when informational symmetry is reestablished, the low-skill workers, who are no longer pooled with the high-skill workers, return. Second, migrants' remittances are conceived as side-payments, made under asymmetric information, by high-skill migrant workers to low-skill workers, who, if they were to migrate, would erode the wages of the high-skill workers. And third, the edge migrants have over native-born workers arises from the lower recognition costs of partners to trade whose type is unknown.