A Land of Milk and Honey with Streets Paved with Gold: Do Emigrants Have Over-optimistic Expectations about Incomes Abroad?
World Bank, Development Research Group, Finance and Private Sector Development Team, 2007 - Employment in foreign countries - 25 pages
Millions of people emigrate every year in search of better economic and social opportunities. Anecdotal evidence suggests that emigrants may have over-optimistic expectations about the incomes they can earn abroad, resulting in excessive migration pressure, and in disappointment among those who do migrate. Yet there is almost no statistical evidence on how accurately these emigrants predict the incomes that they will earn working abroad. In this paper the authors combine a natural emigration experiment with unique survey data on would-be emigrants' probabilistic expectations about employment and incomes in the migration destination. Their procedure enables them to obtain moments and quantiles of the subjective distribution of expected earnings in the destination country. The authors find a significant underestimation of both unconditional and conditional labor earnings at all points in the distribution. This underestimation appears driven in part by potential migrants placing too much weight on the negative employment experiences of some migrants, and by inaccurate information flows from extended family, who may be trying to moderate remittance demands by understating incomes.
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90th percentile Actual and Expected actual employment rate actual mean asked average Column compared conditional earnings distribution conditional income confidence interval cousin David McKenzie degree of underestimation Dominitz and Manski earn abroad elicited probabilities employed in Tonga employment and income estimated expectations about employment expectations of employment expected income extended family February 2007 February females males females fitted distributions Gibson and Stillman income expectations Income in Tonga individuals initial job offer likelihood log-normal distribution Male Dummy male wage premium males females males mean and median mean expected earnings pa'anga PAC ballot losers PAC ballot winners PAC immigrants PAC migrants Pacific Access Category Pacific Island potential emigrants potential migrants principal applicants probabilistic expectations quantiles R-squared respondents subjective distribution survey Table Tongan migrants Total Migrant Network Uncle/Aunt unconditional underestimate income underestimation of income Usual Weekly Income wage income Weekly Income lNZ Weekly work income World Bank would-be emigrants Zealand dollars