Unemployment Benefits, Risk Aversion, and Migration Incentives

Axel Heitmueller

No 207, CERT Discussion Papers from Centre for Economic Reform and Transformation, Heriot Watt University

Abstract: With reference to the EU enlargement, a framework is derived which allows the study of the effect of unemployment benefits on the migration decision. While benefits simply increase the expected gain for risk neutral individuals, they work as an insurance device for risk averse migrants; the results for the two groups might differ. Thus, the migration decision is reformulated as monetary lottery and a utility function exhibiting constant relative risk aversion is applied. The model suggests increased migration incentives independent of taste and a positive selection of risk neutral individuals. Furthermore, risk averse migrants are likely to be found in countries with more evenly distributed incomes, other things equal. While the calibration of the model shows a significant change in migration incentives, empirical results on aggregate data for South-North migration within the EU are ambiguous.

Keywords: migration; welfare benefits; risk aversion; fixed effects (search for similar items in EconPapers)
JEL-codes: D81 J60 J61 J65 (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Unemployment benefits, risk aversion, and migration incentives (2005)
Working Paper: Unemployment Benefits, Risk Aversion, and Migration Incentives (2002)
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