There and Back Again: A Simple Theory of Planned Return Migration

Florian Knauth and Jens Wrona

No 7388, CESifo Working Paper Series from CESifo

Abstract: We present supportive empirical evidence and a new theoretical explanation for the negative selection into planned return migration between similar regions in Germany. In our model costly temporary and permanent migration are used as imperfect signals to indicate workers’ high but otherwise unobservable skills. Production thereby takes place in teams with individual skills as strategic complements. Wages therefore are determined by team performance and not by individual skill, which is why migration inflicts a wage loss on all workers, who expect the quality of their co-workers to decline. In order to internalise this negative migration externality, which leads to sub-optimally high levels of temporary and permanent migration in a laissezfaire equilibrium, we propose a mix of two policy instruments, which reduce initial outmigration while at the same time inducing later return migration.

Keywords: return migration; signalling; selection; strategic complementarity; matching (search for similar items in EconPapers)
JEL-codes: D82 J61 R23 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-lab, nep-mig and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_7388

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