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International Migration with Heterogeneous Agents: Theory and Evidence for Germany, 1967-2009

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Temporary migration, though empirically relevant, is often ignored
in formal models. This paper proposes a migration model with heterogeneous
agents and persistent cross country income differentials that
features temporary migration. In equilibrium there exists a positive
relation between the stock of migrants and the income differential,
while the net migration flow becomes zero. Consequently, existing
empirical migration models, estimating net migration flows, instead of
stocks, may be misspecified. This suspicion appears to be confirmed
by our investigation of the cointegration relationships of German
migration stocks and flows since 1967. We find that (i) panel-unit
root tests reject the hypothesis that migration flows and the explanatory
variables are integrated of the same order, while migration
stocks and the explanatory variables are all I(1) variables, and (ii)
the hypothesis of cointegration cannot be rejected for the stock model.
Original languageEnglish
JournalWorld Economy
Pages (from-to)152-182
Publication statusPublished - 2012

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