World Population Trends and Their Impact on Economic Development

By Dominick Salvatore | Go to book overview

9
Guest Worker Emigration and Remittances

ROBERT E. B. LUCAS

In 1981, I concluded a study of the economic causes, consequences, and evaluation of international migration by noting that: "Theoretical economic analysis of international migration far outstrips the empirical counterparts." 1 Since writing this, several, more systematic, empirical studies relating to the economics of international migration have appeared. In particular, a number of studies now exist pertaining to what are probably the three dominant guest-worker programs in the world: those in the European Economic Community, the Persian Gulf, and South Africa. The present chapter draws upon this new literature and is organized into three main sections: The first section deals with the decisions to emigrate and to remit; the second section considers certain aspects of the demand for guest workers; and the third section turns to the economic consequences for the labor-supplying countries.


THE DECISION TO EMIGRATE AND TO REMIT

Following the contributions of Todaro ( 1969) and Harris and Todaro ( 1970), most of the empirical literature on the determinants of internal migration focuses on expected wage differences between locations. In this framework, the potential migrant weighs a certain wage at home versus a gamble with respect to finding a job in town. However, particularly in a guest worker context, the role of uncertainty is often reversed. A contract is typically signed with a recruiter in the home country before departure, so that wages are known in advance. 2 Moreover, in most guest worker contexts, the migrant has a fixed-period contract and is not entitled to remain in the host country to search for a job after terminating the contract, so that there exists little uncertainty with respect to employment once recruited. The uncertainty with respect to earnings is at home. Thus, in such contexts, the Harris-Todaro framework is reversed, and one must weigh uncertain conditions at home versus a certain wage abroad. In Lucas ( 1987) I

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