Inflation and Labor Migration: Modelling the Venezuelan Case

Ademir Rocha (), Cleomar Gomes Da Silva and Fernando Perobelli

No 2020_05, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: The Venezuelan hyperinflation process has caused serious economic and social consequences. The wave of migrants and refugees fleeing the country is one of the most obvious and important faces of the problem. The objective of this paper is to develop a model that can explain labor migration flow from changes in price level and apply it to the Venezuelan reality. We make use of a theoreticalmethodological framework related to the New Economic Geography. Results from our model's simulations show that, in the short run (1-year simulation horizon), Venezuelan industrial and agricultural workers will tend to migrate to nearby countries, such as Colombia, Brazil, Ecuador and Peru. However, in the long run (10-year simulation horizon), agents seem to decide based on real wage differential. This explains why industrial workers have a propensity to migrate to Chile, Panama, Peru and Mexico, while agricultural workers have an incentive to move to Argentina, Chile, Mexico and Brazil.

Keywords: Inflation; Migration; Venezuela; New Economic Geography (search for similar items in EconPapers)
JEL-codes: E31 J61 R10 (search for similar items in EconPapers)
Date: 2020-06-18
New Economics Papers: this item is included in nep-geo, nep-mac, nep-mig and nep-ure
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