IDEAS home Printed from https://ideas.repec.org/p/soa/wpaper/113.html
   My bibliography  Save this paper

Should I Stay or Should I Go? Migration under Uncertainty: A New Approach

Author

Listed:
  • Yasmeen Khwaja

    (Department of Economics, SOAS University of London, UK)

Abstract

This paper considers migration as an investment decision. We develop a continuoustime stochastic model to explain the optimal timing of migration, in the presence of ongoing uncertainty over wage differentials. Our results reveal that households prefer to wait before migrating, even if the present value of the wage differential is positive, because of the uncertainty and the sunk costs associated with migration. An increased degree of risk aversion discourages migration, and interacts with the other variables and parameters affecting migration by exacerbating their effects. Households are less likely to migrate into rural areas with a less predictable income profile.

Suggested Citation

  • Yasmeen Khwaja, 2000. "Should I Stay or Should I Go? Migration under Uncertainty: A New Approach," Working Papers 113, Department of Economics, SOAS University of London, UK.
    • Handle: RePEc:soa:wpaper:113
    as

    Download full text from publisher

    File URL: https://www.soas.ac.uk/sites/default/files/2022-10/economics-wp113.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ingersoll, Jonathan E, Jr & Ross, Stephen A, 1992. "Waiting to Invest: Investment and Uncertainty," The Journal of Business, University of Chicago Press, vol. 65(1), pages 1-29, January.
    2. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    3. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-142, March.
    4. Oded Stark, 1991. "The Migration of Labor," Blackwell Books, Wiley Blackwell, number 1557860300, April.
    5. Avinash Dixit, 1991. "Analytical Approximations in Models of Hysteresis," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(1), pages 141-151.
    6. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
    7. Avinash Dixit, 1992. "Investment and Hysteresis," Journal of Economic Perspectives, American Economic Association, vol. 6(1), pages 107-132, Winter.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pierre‐Richard Agénor, 2004. "Macroeconomic Adjustment and the Poor: Analytical Issues and Cross‐Country Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 18(3), pages 351-408, July.
    2. Sergio Vergalli, 2011. "Entry and Exit Strategies in Migration Dynamics," Journal of Labor Research, Springer, vol. 32(4), pages 362-389, December.
    3. Paxson, Christina H & Sicherman, Nachum, 1996. "The Dynamics of Dual Job Holding and Job Mobility," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 357-393, July.
    4. Sandri, Serena & Schade, Christian & Mußhoff, Oliver & Odening, Martin, 2010. "Holding on for too long? An experimental study on inertia in entrepreneurs' and non-entrepreneurs' disinvestment choices," Journal of Economic Behavior & Organization, Elsevier, vol. 76(1), pages 30-44, October.
    5. Anastasios Michailidis & Konstadinos Mattas & Irene Tzouramani & Diamantis Karamouzis, 2009. "A Socioeconomic Valuation of an Irrigation System Project Based on Real Option Analysis Approach," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 23(10), pages 1989-2001, August.
    6. Hanno Dihle, 2015. "Real Options in a Ramsey style Growth Model," Discussion Paper Series 32, Department of International Economic Policy, University of Freiburg, revised Dec 2015.
    7. Mankan M. Koné & Carl Gaigné & Lota Tamini, 2017. "Duopolistic Competition and Optimal Switching Time from Export to FDI in Uncertainty," CIRANO Working Papers 2017s-23, CIRANO.
    8. Tzouramani, Irene & Mattas, Konstadinos, 2002. "Employing Real Options Methodology for Decision Making in Greenhouse Technology," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24835, European Association of Agricultural Economists.
    9. Paulo R. Mota & Paulo B. Vasconcelos, 2018. "Does the Deregulation of the Labour Market Reduce Employment Hysteresis? An Analysis in a Low Interest Rate Environment," FEP Working Papers 611, Universidade do Porto, Faculdade de Economia do Porto.
    10. Wang, Tan, 2001. "Equilibrium with new investment opportunities," Journal of Economic Dynamics and Control, Elsevier, vol. 25(11), pages 1751-1773, November.
    11. Mahmudul Anam & Shin-Hwan Chiang & Lieng Hua, 2008. "Uncertainty and International Migration: An Option Cum Portfolio Model," Journal of Labor Research, Springer, vol. 29(3), pages 236-250, September.
    12. Kim, Bongsun & Kim, Eonsoo & Miller, Douglas J. & Mahoney, Joseph T., 2016. "The impact of the timing of patents on innovation performance," Research Policy, Elsevier, vol. 45(4), pages 914-928.
    13. Jérôme Bourdieu & Benoît Coeuré & Béatrice Sédillot, 1997. "Investissement, incertitude et irréversibilité. Quelques développements récents de la théorie de l'investissement," Revue Économique, Programme National Persée, vol. 48(1), pages 23-53.
    14. Arif, Salman & Marshall, Nathan & Yohn, Teri Lombardi, 2016. "Understanding the relation between accruals and volatility: A real options-based investment approach," Journal of Accounting and Economics, Elsevier, vol. 62(1), pages 65-86.
    15. Episcopos, Athanasios, 1995. "Evidence on the relationship between uncertainty and irreversible investment," The Quarterly Review of Economics and Finance, Elsevier, vol. 35(1), pages 41-52.
    16. Anastasios Michailidis & Konstadinos Mattas, 2007. "Using Real Options Theory to Irrigation Dam Investment Analysis: An Application of Binomial Option Pricing Model," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 21(10), pages 1717-1733, October.
    17. Paulo Mota & José Varejão & Paulo Vasconcelos, 2015. "A hysteresis model-based indicator for employment adjustment rigidity," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 42(3), pages 547-569, August.
    18. Bellalah, Mondher, 2016. "Issues in real options with shadow costs of incomplete information and short sales," The Journal of Economic Asymmetries, Elsevier, vol. 13(C), pages 45-56.
    19. Dias, José Carlos & Shackleton, Mark B., 2011. "Hysteresis effects under CIR interest rates," European Journal of Operational Research, Elsevier, vol. 211(3), pages 594-600, June.
    20. Postali, Fernando A.S. & Picchetti, Paulo, 2006. "Geometric Brownian Motion and structural breaks in oil prices: A quantitative analysis," Energy Economics, Elsevier, vol. 28(4), pages 506-522, July.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:soa:wpaper:113. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chandni Dwarkasing (email available below). General contact details of provider: https://edirc.repec.org/data/desoauk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.