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A land of milk and honey with streets paved with gold: Do emigrants have over-optimistic expectations about incomes abroad?

Author

Listed:
  • David McKenzie

    (Development Research Group, World Bank)

  • John Gibson

    (University of Waikato)

  • Steven Stillman

    (Motu Economic and Public Policy Research)

Abstract
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 amongst 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 we combine a natural emigration experiment with unique survey data on would-be emigrants' probabilistic expectations about employment and incomes in the migration destination. Our procedure enables us to obtain moments and quantiles of the subjective distribution of expected earnings in the destination country. We find a significant underestimation of both unconditional and conditional labor earnings at all points in the distribution. This under-estimation 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.

Suggested Citation

  • David McKenzie & John Gibson & Steven Stillman, 2007. "A land of milk and honey with streets paved with gold: Do emigrants have over-optimistic expectations about incomes abroad?," RF Berlin - CReAM Discussion Paper Series 0709, Rockwool Foundation Berlin (RF Berlin) - Centre for Research and Analysis of Migration (CReAM).
    • Handle: RePEc:crm:wpaper:0709
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Expectations; Migration; Natural Experiment;
    All these keywords.

    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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