2 Altruism and Return Migration

29 Pages·2002·0.13 MB·English

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Children and Return Migration
†
Christian Dustmann
This version: May 2001
Abstract
We explore reasons for return migrations which are motivated by altruism towards
the offspring. We develop this idea within a simple model, where parents have paternal-
istic preferences. We show that the benefit of the offspring, as perceived by the parent,
mayleadtoanincrease,ortoadecreaseinthetendencyoftheparentmigranttoreturn
to the home country. Our model suggests that return plans of the parent may react
differently to the presence of daughters than to the presence of sons. We test implica-
tions of our model, using a survey panel data set. We use information on both return
realisationsover14years, andintendedreturnplans. Ourresultslendstrongsupportto
the hypothesis that children influence return plans of the parent migrant. Furthermore,
andalsoinlinewithourhypothesis, wefinddifferencesintheeffectsoffemaleandmale
offsprings.
∗IamgratefultoJeromeAdda, SlobodanDjajic, andIanPrestonforcommentsonearlierversions
of this paper.
†Department of Economics, University College London, Gower Street, London WC1E. Email:
[email protected]
1 Introduction
The empirical and theoretical literature on migration has paid little attention to the
fact that immigrants may return to their home countries, despite persistently more
favourable conditions in the host economies. Return migrations are however frequent,
not only in Europe, but also in the US. Return plans of immigrants have important
consequences not only for their investment in host country specific human capital and
their economic assimilation, but also for their investment into social capital and their
social assimilation.
One important research question is to understand the motives for why immigrants
may want to return, despite more favourable economic conditions in the host economy.
Djajic and Milbourne (1989) show that one reason for returning may be a preference
for consumption in the host country. Djajic (1989) and Dustmann (1997) illustrate
that a return migration may be optimal if relative prices are higher in the country
of destination. Dustmann (1995) develops a model where a return migration may
be optimal if human capital, accumulated abroad, is more valuable in the the home
country. Co, Gang, and Yun (2000) find some evidence for this hypothesis for return
migrants to Hungary. Dustmann and Kirchkamp (2001) generate return migration
in a model where the rate of return to self-employment activities is higher in the
country of origin. Mesnard (2000) develops a model where return migration is optimal
if there are capital market imperfections in the country of origin. Other reasons for
return migrations are related to the differential position of the individual in the income
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distributions of host- and home country. Stark (1997) develops a model of relative
deprivation where re-migration is a preferred choice because the migrant gains utility
from improving his position in the overall income distribution. Borjas and Bratsberg
(1996) show that return migration may be advantageous for some individuals, despite
higher mean wages in the host country, if the dispersion of the home - and host country
earnings distributions differs. Drapier et al. (2001) show that return migration may be
socially optimal if emigration creates externalities due to decreasing returns to scale in
the home ecomomy.
In most of these models, reasons for a return migration in spite of higher wages
in the host country become apparent when considering migration and re-migration
decisions within an intertemporal life cycle model. Motives for re-migration may be
found, however, well beyond the individual’s own life cycle span. It is not unlikely that
migrants take account of the benefit of future generations when making migration and
re-migration choices. Like other investment decisions, the decision to return migrate
may be motivated, among others, by altruism towards the offspring. Dynastic motives
for re-migration decisions may be an important component in our understanding of
re-migration behaviour. Hardly any work exists which addresses this issue.
Therearemanyreasonswhyparentsmayconsiderthechild’sfuturetobebrighterin
the host country than in the home country. Most prominently, educational possibilities
and career prospects for the offspring may be considered unequally more favourable in
theimmigrationcountry(seeDjajic, 2000, forananalysis). Ontheotherside, thereare
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reasons which may lead parents to believe that the home country is more beneficial for
the child’s future. For instance, concerns about the child adopting a lifestyle perceived
to be not in line with traditional views and cultural heritage may influence the parent’s
decisions about remaining abroad.
In this paper, we develop these ideas within a simple model, where parents have
altruistic preferences. We show that the welfare of the offspring, as perceived by the
parent, may lead to an increase, or a decrease in the tendency of the parent migrant to
return back home. More specifically, it leads to a decrease if child’s career prospects
are perceived as better in the host economy, and if this is the only parental concern.
On the other side, it may lead to an increase in the likelihood to return if there is
the perception on the side of the parent that a more appropriate environment for the
offspring is provided in the country of origin.
We isolate some testable implications of the model. Our analysis suggests that the
presence of children is associated with return plans. Concerns about detrimental, or
beneficial effects of remaining in the host country on the child’s future welfare may
differ according to the offspring’s gender. While concerns about preserving traditions
may be dominant for female offsprings, concerns about future economic career and
prosperity may be dominant for male offsprings. If this is the case, then sons should
affect return plans and return decisions differently than daughters.
We test these predictions of the model, using a survey panel data set on immigrants
over a 14 years period. This data set provides us with unique information on both
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intended (survey-based) return plans, and return realisations over 14 years. Our results
lend support to the hypothesis that children influence return decisions as well as return
plans. Wefindalsosomeevidencewhichsuggeststhattherearedifferencesintheeffects
of female and male offsprings. One immediate consequence of our work is that policies
which aim at assimilating immigrants to the host country economy need to look well
beyondtheindividual’sownlifecyclespan, andtakeaccountofdynasticconsiderations
on the side of the migrant.
2 Altruism and Return Migration
We formulate the above ideas in the simplest possible model. Consider a family unit,
consisting of a parent migrant and her offspring. There are two periods. At the
beginning of the first period, the parent migrant resides and works in the host country.
The child does not contribute to family income, and is subsidised by the parent in
period 1, but joins the labour market in the second period. The parent decides about
her own consumption in periods 1 and 2, and the child’s consumption in period 1;
furthermore, she decides for herself and for her offspring whether to return in period
2, which determines the child’s consumption in the second period. The parent has
altruistic preferences, to the effect that she transfers income to the child in period 1,
and considers the child’s benefit in period 2 when making return plans. The return
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decision is taken by comparing lifetime welfare in the two locations.1
Let the utility function of the parent migrant is given by
VP = U1(c1,k1)+hU2I(c2I,k2I,aI,bI)+(1−h)U2E(c2E,k2E,aE,bE) (1)
where c1, c2j and k1, k2j, j = I,E, are consumption of parent and offspring in host–
(Immigration, I) and home (Emigration, E) country, and and aj and bj are preference
parameters. The parameter h is either 0 or 1; the migrant chooses h, and returns if
h = 1.
Suppose that period 1 and period 2 utility functions are of the following simple
form:
U1(c1,k1) = lnc1 +γln(k1), (2-a)
U2j(c2j,k2j) = ln(c2jbj)+γln(kjaj) ,j = E,I,γ ≥ 0. (2-b)
We normalise aI = 1 and bI = 1. Accordingly, a parameter bE > 1 indicates that
each unit of consumption creates a higher utility to the parent migrant when residing
in the home country. Similarly, the parameter aE reflects the parent’s beliefs about
1For simplicity, we exclude the possibility that parent and offspring live in different locations in
period 2. If there is a cost attached to living apart (as it is likely to be the case), then the qualitative
results we derive carry through.
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the offspring’s benefits of living (and consuming) in the home country. If aE > 1, the
parent considers each unit of consumption in the home country as more beneficial for
the child than each unit of consumption in the host country. The parameter γ is an
altruistic weight, and we assume that γ ≥ 0.
The budget constraints of parent and child are given by
c1 +hc2I +(1−h)c2E +k1 = y1 +hy2I +(1−h)y2E, (3-a)
hk2I +(1−h)k2E = hz2I +(1−h)z2E, (3-b)
where y1 and y2j are income of the parent in the first and second period in home-
or host country (j = E,I) respectively, and z2j are the respective income flows for the
child in period 2.
The parent migrant solves the above problem by maximising (1) with respect to
own consumption in the two periods, and the offspring’s consumption in period 1,
subject to (3-a) and (3-b), for two scenarios: Remaining in the host country in period
2, or returning back home. The decision whether or not to return home is based on
a comparison of the indirect lifetime utility functions in the two cases. For the utility
function specified in (3-a, 3-b), the migrant returns if the following expression is larger
than zero:
(cid:1) (cid:2) (cid:3) (cid:1) (cid:2) (cid:4)
y1 +y2E z2E
(2+γ) ln +lnbE +γ ln +lnaE > 0. (4)
y1 +y2I z2I
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If the parent is not altruistic (γ = 0) and indifferent between consuming in home- or
host country (bE = 1), the return decision reduces to the classical comparison between
earnings in home- and host country - a comparison between lifetime income in the two
locations. For y2I > y2E, migration is permanent in this case. If the migrant has a
preference for consuming at home (bE > 1), the second term is positive, and migration
may be temporary, although wages are persistently higher in the host economy. These
are results which have been studied before (see for instance Dustmann, 1997).
Now consider an altruistic parent (γ > 0). The first term in (4) is the total loss in
utility in case of a return migration, because earnings are lower at home. This term
includes now the loss in utility the parent experiences by not being able to allocate
the same amount of resources to the offspring in the first period, because lifetime
earnings are lower in case of a return. Altruism towards the offspring leads therefore
to a larger weight to earnings advantages in the host country when making the re-
migration decision.
In addition, the parent takes account of the offspring’s utility in the second period,
which is reflected by the bracketed expression in (4). The first term reflects that,
if economic prospects for the offspring are better in the host country (z2I > z2E),
the probability that the parent migrant may consider to stay abroad increases. Career
considerationsfortheoffspringmayleadtoapermanentmigration, evenif, inisolation,
the parent migrant would consider it beneficial to return home (either because y2I <
y2E, or because bE > 1).
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The second term in brackets reflects the parent’s perception about whether con-
sumption is more beneficial for the offspring in home- or host country. If the parent
migrant perceives the host country environment as detrimental to the utility of the
offspring (which, in our simple model, is indicated by aE > 1), then this may com-
pensate for economic reasons for which the parent considers the future of the child as
more promising in the host country. Reasons why the parent migrant may perceive
the home country as a more appropriate environment for the future of the offspring
include possible marriage arrangements, as well as concerns that the host country will
undermine a traditional life style, or inhibit cultivation of religious practises.
It is not unlikely that beneficial influences of the home country environment are felt
as more important for daughters, while, at the same time, beneficial aspects of possibly
advantageous labour market conditions and earnings prospects in the host country
weight less for female than for male offsprings. An immediate implication of this is
that the presence of children in the household has an effect on the return propensity of
the parent migrant, which can not be signed unambiguously. However, the relationship
between girls and return propensities is likely to differ from the relationship between
boys and return propensities, since avers effects of the host country environment may
be perceived more important for females, while career prospects have a higher weight
for males.
These implications of our model are in principle testable. If we observed return
patterns or return plans of immigrants, together with background characteristics and
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