Abstract
This paper uses individual-level data covering 30 transition countries that account for over one-quarter of the worldwide immigrant stock to assess the impact of risk aversion on willingness to migrate. It extends the previous literature by allowing the effect of risk aversion to depend on the level of risk in the sending country. Consistent with theories of individual-level migration decisions, we find that risk aversion has a robust and statistically significant negative impact on willingness to migrate within countries as well as abroad. As predicted by theory, this impact is robustly less negative in riskier sending countries. Furthermore, this negative impact is significantly larger for willingness to migrate abroad than willingness to migrate internally. We also find that, even after controlling for an extensive set of control variables, willingness to migrate internally and abroad are highly correlated. This suggests that internal and international mobility decisions are closely linked.
Highlights
Ever since the seminal work of Sjaastad (1962) and Harris and Todaro (1970), economists have modeled migration as an investment decision under uncertainty
Consistent with the previous literature (e.g., Dohmen et al 2011), we find a large variance in risk aversion across individuals with most of the respondents reporting an intermediate level of risk aversion
Using a large-scale individual-level dataset covering 30 countries that account for more than 25% of worldwide migrant stocks, we find a statistically significant negative impact of risk aversion on the willingness to migrate both within countries and abroad
Summary
Ever since the seminal work of Sjaastad (1962) and Harris and Todaro (1970), economists have modeled migration as an investment decision under uncertainty. This paper uses a large-scale, multi-country individual-level dataset (the Life in Transition Survey, LITS) to provide direct evidence on the impact of risk aversion on the propensity to migrate across and within countries in a unified framework. This data provides information on migration intentions both within a country and abroad for 30 transition countries that, according to Özden et al (2011), account for over 25% of worldwide migrant stocks. Individual-level risk aversion reduces willingness to migrate abroad more strongly than willingness to migrate within a country
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