return migration uncertainty and precautionary savings this paper presents a life cycle model where migrants determine re migration and consumption simultaneously in a stochastic environment whether precautionary savings of migrants are above or below those of natives is ambiguous in general the sign depends on the risk in host and home country labor markets and on the correlation of labor market shocks furthermore the effect of an uncertain environment on migration and re migration plans cannot be unambiguously signed for the general case it depends on the size of the wage differential as well as the relative risk the migrant exhibits in the two labor markets

temporary foreign workers and firms theory and canadian evidence abstract temporary foreign worker tfw programs have grown considerably in size when uncapped we develop a simple efficiency wage model to explain this phenomenon and examine the empirical evidence for it we also use the model to evaluate the implications of tfw programs for domestic workers in our framework firms that have been unable to find domestic workers may hire tfws at the wage previously advertised to domestic workers due to the lower outside option for tfws than domestic workers tfws will exert more effort for the same wage firms would thus prefer to hire otherwise identical tfws rather than domestic workers our model identifies an unintended consequence of a tfw program since the repercussions of a failed domestic job search are less severe if a tfw may be hired instead firms have an incentive to lower their wage offers made to domestic workers using canadian data we find that relative to domestic workers tfws work longer hours have lower rates of absenteeism and are less likely to be laid off consistent with higher effort in our model moreover for tfws from home countries with a relatively high outside option effort is lower than for tfws from other countries resume travailleurs etrangers temporaires et entreprises theorie et exemple canadien en l absence de plafonnement les programmes de travailleurs etrangers temporaires ptet se sont considerablement developpes afin d expliquer ce phenomene et d en examiner les preuves empiriques nous avons developpe un modele simple de salaire d efficience nous avons egalement utilise ce modele pour evaluer l incidence des ptet sur les travailleurs domestiques dans notre cadre d etude les entreprises peinant a trouver une main d uvre locale peuvent embaucher des travailleurs etrangers temporaires au salaire prealablement propose aux travailleurs domestiques compte tenu d options exterieures plus faibles les travailleurs etrangers temporaires deploieront davantage d efforts pour le meme salaire les entreprises prefereront donc embaucher des travailleurs etrangers par ailleurs identiques plutot que des travailleurs domestiques notre modele identifie une consequence inattendue aux ptet etant donne que les consequences d une recherche d employes domestiques infructueuse sont attenuees par l embauche de travailleurs etrangers temporaires les entreprises sont incitees a diminuer les offres salariales proposees aux travailleurs locaux en exploitant les donnees propres au canada nous avons decouvert que les travailleurs etrangers temporaires travaillaient plus d heures avaient des taux d absenteisme inferieurs et etaient moins susceptibles de se faire congedier que les travailleurs domestiques conformement au concept d effort accru developpe dans notre modele en outre pour les travailleurs etrangers temporaires originaires de pays a options exterieures relativement elevees l effort sera moindre que pour ceux provenant d autres pays

migrants in a guest worker system a utility maximizing approach this paper examines the behavior of utility maximizing migrants in a system of guest worker migration their pattern of leisure and commodity consumption at home and abroad is analysed and related

risk allocation and the costs and benefits of public private partnerships we study the agency costs of delegated public service provision focusing on the link between organizational forms and uncertainty at project implementation we consider a dynamic multitask moral hazard environment where the mapping between efiort and performance is ex ante uncertain but new information may come along during operations our analysis points out at the e ciency gains that bundling planning and implementation as under public private partnerships can bring in terms of better project design and lower operational costs bundling also results in increasingly better performance as uncertainty is reduced by growing experience in the sector bundling should instead be viewed with caution when the private sector seeks to radically innovate on public service provision or to introduce new services but lacks the knowledge and expertise to anticipate the impact of the innovative design procedure technology on the cost of operations the compounding of asymmetric information ex post plus moral hazard and renegotiation may generate diseconomies of scope in agency costs which for high operational risk can make unbundling optimal in this context the use of private flnance can help re establishing the beneflt of bundling only if lenders have su cient expertise to help assessing project risks

optimal linear income taxation in the presence of emigration abstract this paper examines optimal linear income taxation when individuals are able to escape taxation by migrating a model is presented in which closing the economy to migration must raise the optimal marginal tax however this result may be reversed under an alternative definition of a closed economy

inflation and asset returns in a monetary economy postwar u s data are characterized by negative correlations between real equity returns and inflation and by positive correlations between real equity returns and money growth these patterns are closely matched quantitatively by an equilibrium monetary asset pricing model the model also implies negative correlations between expected asset returns and expected inflation and it predicts that the inflationasset return correlation will be more strongly negative when inflation is generated by fluctuations in real economic activity than when it is generated by monetary fluctuations the co movements of real asset returns inflation and money growth have been studied extensively over the past fifteen years table i displays some of the statistical properties of these series using quarterly u s data from 1959 to 1990 note first the significantly negative correlation between real equity returns and inflation note also the negative correlation between inflation and the ex post real return to nominally riskless bonds while this fact is not particularly surprising numerous studies conclude that the correlations between ex ante real asset returns and expected inflation are also negative 2 in contrast to these patterns the correlation between money growth and real equity returns is weakly positive in the data while the correlation between money growth and the real bond return is virtually zero initially these empirical patterns were viewed as anomalies negative correlations between inflation and ex post real stock returns contradict the traditional view that equities ought to act as an inflation hedge 3 negative correlations between expected inflation and ex ante real returns violate the

moral hazard with several agents abstract we consider a situation in which a principal hires two agents whose cooperation is technically profitable and study three models that incorporate different assumptions about the agents cooperative behavior we find a close relationship between the agents commitment capacity and the characteristics of the optimal contract a greater capacity to cooperate leads to more efficient outcomes we also show that unless agents form a team the efficient level of mutual help is not achieved in equilibrium

return and dynamics the path of labor migration when workers differ in their skills and information is asymmetric an implementation of the theory of labor migration under asymmetric information shows that return migration arises from the reinstatement of informational symmetry which induces low skill workers who are no longer pooled with high skill workers to return when workers in an occupation constitute more than two skill levels say four without loss of generality the following patterns emerge migration is sequential that is it proceeds in waves each wave breaks into workers who return and workers who stay within waves the returning migrants are the low skill workers the average skill level of migrants is rising in the order of their wave excerpt

interest rates and currency prices in a two country world abstract this paper is a theoretical study of the determination of prices interest rates and currency exchange rates set in an infinitely lived two country world which is subject both to stochastic endowment shocks and to monetary instability formulas are obtained for pricing all equity claims nominally denominated bonds and currencies and these formulas are related to earlier closely related results in the theories of money finance international trade

bundling as an optimal selling mechanism for a multiple good monopolist abstract multiple objects may be sold by posting a schedule consisting of one price for each possible bundle and permitting the buyer to select the price bundle pair of his choice we identify conditions that must be satisfied by any price schedule that maximizes revenue within the class of all such schedules we then provide conditions under which a price schedule maximizes expected revenue within the class of all incentive compatible and individually rational mechanisms in the n object case we use these results to characterize environments mainly distributions of valuations where bundling is the optimal mechanism in the two and three good cases

source country earnings and emigration while higher wages at home reduce the incentive to emigrate by increasing the opportunity cost of working abroad they also facilitate emigration for liquidity constrained individuals our theoretical model examines the interaction between these two effects we show that i the relationship between the home country wage and emigration pressure is hump shaped ii the hump is more pronounced the lower the cost of migration and iii the ratio of high to low skilled emigrants is decreasing in the home country wage we test our model empirically for three different skill groups of emigrants and find strong evidence in support of the three hypotheses the peak emigration rate for the low skilled is estimated at 4000 at 2000 ppp adjusted prices a rise in the annual per capita income of the source country from 231 of the poorest economy in our sample to 4000 is associated with an increase in the emigration rate of its low skilled workers from about 2 7 to 5 0

optimal procurement contracts with pre project planning the paper studies procurement contracts with pre project investigations in the presence of adverse selection and moral hazard to model the procurer s problem we extend a standard sequential screening model to endogenous information acquisition with moral hazard the optimal contract displays system atic distortions in information acquisition due to a rent effect adverse selection induces too much infor mation acquisition to prevent cost overruns and too little information acquisition to prevent false project cancellations moral hazard mitigates the distortions related to cost overruns yet exacerbates those related to false negatives the optimal mechanism is a menu of option contracts that achieves the dual goal of providing incentives for information acquisition and truthful information revelation

procurement auctions with entry of bidders abstract in procurement auctions with a fixed number of bidders there is a tradeoff between cost efficiency and rent extraction an optimal mechanism therefore entails distortions of effort laffont and tirole 1987 if potential suppliers must sink an entry investment before they can participate in the auction then decreasing the firms rent may imply reduced entry we show that if potential bidders are uninformed before entry commitment to a plain nondistortive auction is optimal in contrast if potential bidders learn all their private information before entry the optimal mechanism entails the same distortions as in laffont and tirole s static model

immigrant decisions concerning duration of stay and migratory frequency abstract the temporary and repetitive character of contemporary labor migration is explained by assuming that immigrants have a preference for location a life cycle model of immigrant behavior is developed to determine net lifetime income total time allocated to home country and foreign country residence and the number of migratory trips because of income effects home wages and foreign wages are not symmetric in their effect on the location of work effort it is also shown that changes in travelling costs have predictable consequences for the number of border crossings but not for the total time spent in the foreign labor market

increasing returns migrations and convergence abstract the paper investigates the link between convergence and factor mobility it contrasts the predictions of exogenous growth models where factor mobility is found to promote convergence with endogenous growth models where factor mobility invariably leads to a cumulative process of regional divergence the paper develops a simple model of regional growth with mobile factors increasing returns to scale and diminishing returns to the reproducible factor it also tries to provide more solid microfoundations to the specification of the migration choice because of diminishing returns to the reproducible factor the economy will not be able to generate endogenous self sustaining growth nevertheless the results suggest that even in the context of an exogenous growth model convergence is not warranted however convergence may occur for some particular constellations despite the presence of increasing returns to scale more precisely it is shown that convergence is more likely the greater is the scope for scale economies and somewhat paradoxically the lower is the degree of labor mobility

the income distribution frontier and taxation of migrants abstract the output distribution frontier which traces out the economy s output and income distribution options is used to confirm and explain intuitively the bhagwati hamada results on the taxation of migrants from ldcs by their native country it is shown that freedom of migration without taxation may reduce the welfare of those who remain in the ldc but that taxation and free migration can be superior for them to either prevention of migration or freedom of migration without taxation an externalities argument shows why even migrants may benefit

a comparative analysis of the nativity wealth gap this paper investigates the source of the gap in the relative wealth posi tion of immigrant households residing in australia germany and the united states our results indicate that in germany and the united states wealth difierentials are largely the result of disparity in the educational attainment and demographic composition of the native and immigrant populations while income difierentials are relatively unimportant in understanding the nativity wealth gap in contrast the relatively small wealth gap between australian and foreign born households exists because immigrants to australia do not translate their relative educational and demographic advantage into a wealth advantage on balance our results point to substantial cross national disparity in the economic well being of immigrant and native families which is largely consistent with domestic labor markets and the selection policies used to shape the nature of the immigration ow

currency prices terms of trade and interest rates a general equilibrium asset pricing cash in advance approach currency prices terms of trade and interest rates a general equilibrium asset pricing cash in advance approach

bundling decisions in procurement auctions with sequential tasks abstract this paper investigates the principal s bundling decision during a procurement auction for a project consisting of two sequential tasks in which task externality exists and information arrives sequentially we show that although increasing the number of bidders in the market for the second task always tilts the principal s choice toward unbundling increasing the number of consortiums that can perform both tasks tilts the principal s preference toward bundling if the externality is negative

temporary and permanent migration with and without an immobile factor abstract this paper develops two two country overlapping generations models one with and one without an immobile factor to study temporary and permanent migration temporary migration is shown to be equivalent to international lending and borrowing one strong result found in the literature that if natives of each country are homogeneous permanent migration leads to the migration of the entire population of the impatient country in the long run is overturned welfare effects of migration are analyzed

return migration and occupational choice evidence from albania this paper explores the impact of return migration on the albanian economy by analyzing the occupational choice of return migrants while explicitly differentiating between self employment as either own account work or entrepreneurship we find that the own account workers have characteristics closer to non participants in the labor market i e lower education levels while entrepreneurship is positively related to schooling foreign language proficiency and savings accumulated abroad furthermore compared to having not migrated return migrants are significantly more likely to be entrepreneurs showing the positive impact of migration on job creating activities in albania

temporary emigration and welfare the case of low skilled labor this article studies the implications of temporary emigration for the welfare of a source country the framework is one of general equilibrium where the economy s stocks of both capital and labor are endogenously determined by the saving and migration decisions of optimizing agents simulations of the model suggest that for realistic values of the parameters welfare of nonmigrants of the source country is maximized when the migrants are employed abroad for a period in the range of roughly 8 12 years the ideal duration is found to be an increasing function of the international wage differential migration costs and the degree to which the rights of migrants are protected in the host country

risk uncertainty and exchange rates this paper is motivated by two facts failure of log linear empirical exchange rate models of the 1970 s and the observed variability of risk premiums in the forward market rational maximizing models predict that changes in conditional variances of monetary policies government spendings and income growths affect risk premiums and induce conditional volatility of exchange rates i examine theoretically how changes in these exogenous conditional variances affect the level of the current exchange rate and attempt to quantify the extent that this channel explains exchange rate volatility using autoregressive conditional heteroscedastic models

to build or not to build normative and positive theories of public private partnerships abstract this paper analyzes whether the two tasks of building infrastructures which are socially useful in providing public services and managing these assets should be bundled or not when performance contracts can be written both tasks should be performed altogether by the same firm if a better design of the infrastructure helps also to save on operating costs otherwise tasks should be kept apart and undertaken by different units in incomplete contracting environments we isolate conditions under which either the traditional form of public provision of services or the more fashionable public private partnership emerges optimally the latter dominates when there is a positive externality and the private benefits from owning assets are small enough finally we take a political economy perspective and study how incentive schemes are modified under the threat of capture of the decision makers much of the gains from bundling may be lost in this case

bertrand competition with subcontracting we investigate how the possibility of subsequently subcontracting production to each other influences rivals initial competition for a contract or a market as a two stage game in its first stage the two firms engage in price competition to supply a contract or a market in the second stage the firms may subcontract production to each other it is supposed that the firms produce the identical product with the same strictly convex cost function the incentive for subcontracting comesfrom the strictly convex production costs a firm is obliged to supply the entire quantity demanded at its quoted price our analysis discloses that if the winner of the game s first stage determines the terms of the subcontract in its second stage there exists a unique subgame perfect nash equilibrium spne in pure strategies in which the firms bid the same price in the first stage and both receive zero profits on the other hand if the loser of the game s first stage sets the terms of the subcontract in the second stage there exists a unique spne in pure strategies in which the firms bid the same price in the first stage and both receive positive profits the presence of the possibility of subcontracting supports a unique spne in pure strategies even though no actual subcontracting may occur the spne price is below the socially optimal price in the first case and is above it in the second case we also consider other modes of sharing the gains from subcontracting between the two firms such as the nash bargaining solution

return migration wage differentials and the optimal migration duration in simple static models migration increases with the wage differential between host and home country in a dynamic framework and if migrations are temporary the size of the migrant population in the host country depends also on the migration duration this paper analyses optimal migration durations in a model which rationalises the decision of the migrant to return to his home country despite persistently higher wages in the host country the analysis shows that if migrations are temporary the optimal migration duration may decrease if the wage differential grows larger using micro data for germany the second part of the paper provides empirical evidence which is compatible with this hypothesis

explaining saving investment correlations national saving and investment rates are highly positively correlated in virtually all countries this is puzzling as it apparently implies a low degree of international capital mobility this paper shows that the observed positive correlation between national saving and investment rates arises naturally within a quantitatively restricted equilibrium model with perfect mobility of financial and physical capital the model is consistent with the fact that saving investment correlations are larger for larger countries but are still substantial for small countries further the model is consistent with the finding that current account deficits tend to be associated with investment booms copyright 1993 by american economic association

skills and the pattern of migration the role of qualitative and quantitative restrictions on international labor mobility this paper develops a two country model of international migration in an attempt to study the role of both qualitative and quantitative restrictions on international labor mobility individuals are distinguished in terms of their ability and age enabling the model to examine factors which influence the age and skill profile of those who migrate as well as the equilibrium flow of migrants and the pattern of factor rewards in the two economies effects of changes in certain parameters of the model are related to the nature of the immigration policy enforced by the host country the role of emigration restrictions is also considered excerpt

a general equilibrium model of guest worker migration the source country perspective abstract this paper examines the problem of guest worker migration from an economy populated by identical utility maximizing individuals with finite working lives the decision to migrate the rate of saving while abroad as well as the length of a migrant s stay in the foreign country are all viewed as part of a solution to an intertemporal optimization problem in addition to studying the microeconomic aspects of temporary migration the paper analyses the determinants of the equilibrium flow of migrants the corresponding domestic wage and the level of welfare enjoyed by a typical worker effects of an emigration tax are also investigated

the laissez faire approach to international labor migration the case of the arab middle east the weaknesses of laissez faire theories and policies on international labor migration are examined by reviewing contemporary labor migration in the middle east estimates of the number of arab migrant workers in the arab region in 1975 are presented and three types of problems that labor migration creates for sending countries are identified 1 uncertainty for both economic and political reasons about the continuation or expansion of the current flows 2 micro effects of remittance spending and labor migration and 3 the selectivity of migration and its impact on certain key sectors it is argued that although individual migrants and employers benefit from laissez faire migration policies the impacts on sending societies as a whole are ambiguous excerpt

international business cycles what are the facts abstract modern business cycle theory involves developing models that explain stylized facts for this strategy to be successful these facts should be well established in this paper we focus on the stylized facts of international business cycles we use the generalized method of moments and quarterly data from twenty industrialized countries to estimate and test hypotheses concerning pairwise cross country correlations of macroeconomic aggregates a remarkable common feature emerges these correlations are mostly positive not very high and of a similar order of magnitude the most important discrepancy with the theory is the low cross country correlation of consumption

trade in capital goods and the volatility of net exports and the terms of trade abstract standard two country dynamic general equilibrium models grossly underpredict the volatility of net exports and the terms of trade we analyze whether trade in capital goods equipment can explain this failure trade in equipment accounts for about half of the trade balance of g7 countries and most of its fluctuations over the 1971 1990 period simulation results show that a standard model with trade in final goods generates a volatility of 0 10 for net exports and 0 52 for the terms of trade while the annual g7 median relative volatility are 0 60 and 2 18 models with trade in equipment however generate a volatility between 0 55 and 0 98 for net exports and between 1 23 and 3 24 for the terms of trade

the optimal migration duration and activity choice after re migration if migrants return to their origin countries two questions arise which are of immediate economic interest for both immigration and emigration country what determines their optimal migration duration and what are the activities migrants choose after a return little research has been devoted to these two issues this paper utilises a unique survey data set which records activities of returned migrants we first illustrate the activities of immigrants after returning we show that more than half of the returning migrants are economically active after return and most of them engage in entrepreneurial activities we then develop a model where migrants decide simultaneously about the optimal migration duration and their after return activities guided by this model we specify and estimate an empirical model where the after return activity and the optimal migration duration are simultaneously chosen

international migration remittances and welfare in a dependent economy abstract this note extends the work of rivera batiz 1982 in an attempt to examine the role of remittances in determining the effects of migration on the welfare of the remaining residents in a small open economy producing both traded and non traded goods it is shown that if the flow of remittances exceeds a certain critical amount the remaining residents benefit from migration even if they do not receive any of the remittances themselves this is in sharp contrast with the results of the rivera batiz model in which the possibility of a gain for the non migrants is ruled out

the west german gastarbeiter system of immigration abstract the paper analyzes the west german immigration system as operated until early 1970s defining the essential features of this system the authors explain the cross sectional industrywise utilization of foreign guestworkers during 1964 65 to 1971 72 they also extend the analysis to explaining the sourcewise by country composition of foreign workers during this period

why do migrants return to poor countries evidence from philippine migrants responses to exchange rate shocks abstract this paper distinguishes between target earnings and life cycle motivations for return migration by examining how philippine migrants return decisions respond to major unexpected exchange rate changes in their overseas locations due to the asian financial crisis overall the evidence favors the life cycle explanation more favorable exchange rate shocks lead to fewer migrant returns a10 improvement in the exchange rate reduces the 12 month return rate by 1 4 percentage points however some migrants appear motivated by target earnings considerations in households with intermediate foreign earnings favorable exchange rate shocks have the least effect on return migration but lead to increases in household investment

some essentials of a workable guest worker program a guest worker program provides an appealing way of addressing labor shortages in an advanced country it requires however that foreign workers are willing to return home when their work permit expires i examine how immigration policies enforcement measures and opportunities available in various markets at home and abroad affect the behavior of program participants welfare of a migrant who obeys the rules of the program is compared with that of workers who choose other options in order to define the conditions under which temporary migration is attractive to potential migrants and at the same time consistent with voluntary return

the economics of the to and fro migrant some welfare theoretical considerations the effects of international to and fro migration on the economic welfare of the migrants and the nonmigrants in the host and home countries are examined a to and fro migrant is defined as a worker who changes residence from origin to destination without any systematic tendency to remain in any of the two permanently the study is based on the theoretical framework developed by krauss the results indicate that to and fro emigration from a source country to a recipient country increases the economic welfare of the migrants and the nonmigrants residing in the host country but it tends to decrease the welfare of the nonmigrants residing in the source country in general the migration also tends to be pareto optimal from a world point of view excerpt

the economics of temporary migrations many migrations are temporary a fact that has often been ignored in the economic literature on migration such omission may be serious in that expected migration temporariness can impart a distinct dynamic element to immigrants economic behavior generating possible consequences for nonmigrants in both home and host countries in this paper we provide a thorough examination of the various aspects of temporary migrations that matter for the analysis of economic phenomena we demonstrate the extent of temporary migrations in population movements we show how temporariness can affect the various economic choices and how better data have improved both the measurement of nonpermanent migrations and the analyses of various aspects of migrant behavior we propose a general theoretical framework for modeling temporary migration decisions based on which we outline the various motives for temporariness while simultaneously reviewing related literature and available data sources we discuss the possible consequences of migration temporariness for nonmigrants in both home and host countries jel f22 f24 j11 j61 k37 o15

overshooting the savings target temporary migration investment in housing and development summary there are two seemingly competing branches of the literature on saving and duration of stay decisions of temporary migrants one relies on the target saving explanation and the other on utility maximization over a life cycle we attempt to reconcile the two approaches within a framework where a migrant has a well defined savings target in planning to purchase a new home at origin but also chooses the time of return and the consumption path to maximize lifetime utility our analysis highlights the role of property investment and savings repatriation in the relationship between temporary migration and development

cost reducing investment optimal procurement and implementation by auctions the authors analyze a model in which potential suppliers invest in research and development r d and then compete for a procurement contract from a buyer if the buyer is able to commit to a procurement mechanism before the investment stage the full information solution can be uniquely implemented by first price and second price sealed bid auction mechanisms when the r d technology exhibits decreasing returns to scale if the procurement mechanisms and the levels of investment are chosen simultaneously the full information solution cannot be implemented the authors discuss how the second best equilibrium contract varies with the number of suppliers copyright 1996 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

international trade and labor migration a theory of the relationship between international trade and labor mobility is developed that takes into account five characteristics of such migration including its temporary nature differences between migrant and native labor the acceptance of unpredictable conditions of employment by migrant labor the ready availability of further labor resources and international capital mobility particular attention is paid to the role of international labor migration in helping to insulate native populations from the rigors of industrial fluctuations and in helping to preserve import competing industries that would have succumbed without the availability of cheap imported labor

a life cycle model of outmigration and economic assimilation of immigrants in germany this paper estimates a structural dynamic life cycle model of outmigration where in each period immigrants choose whether to work in the host country not to work but remain in the host country or outmigrate the model incorporates several features of existing life cycle theories of outmigration but distinguishes itself by introducing uncertainty in about future earnings and preferences which allows immigrants to revise their duration decisions throughout their migration experience because immigrants simultaneously face a migration and a work decision in each period the economic assimilation rates commonly used to assess the performance of immigrants in the host economy are endogenously determined and estimated a feature previously ignored in the literature we overcome the problem of not directly observing outmigration movements by using panel attrition as a proxy variable and use a simple method to correct for the fact that part of the attrition is not a consequence of outmigration estimates are used to predict changes in life cycle patterns of outmigration behavior estimation results indicate that outmigration does not depend exclusively on earnings differentials estimated assimilation rates are found to be robust to selection effects immigrants are found to be forward looking decision makers and simulations show that predicted migration durations are very sensitive to changes in their economic environment and differ considerably from those of a myopic model

investment opportunities in the source country and temporary migration this paper examines how attractive investment opportunities available to temporary migrants in their country of origin aect their saving behavior and the optimal duration of stay abroad the model predicts an inverse u shaped relationship between migration duration and the expected rate of return on repatriated savings a higher rate provides an incentive to go back earlier and consume less abroad while it can also trigger emigration aimed at generating the savings required for investment after return at a more general level the paper illustrates how the behavior of temporary migrants re ects the interaction between their preferences and the opportunities available in the labor and capital markets of both countries

repeated auctions of incentive contracts investment and bidding parity with an application to takeovers this article considers a two period model of natural monopoly and second sourcing the incumbent supplier invests in the first period after observing the incumbent s first period performance the buyer may break out in the second period the investment may or may not be transferable to the second source and it may be monetary or take the form of human capital we determine whether the incumbent should be favored at the reprocurement stage and how the slope of his incentive scheme should evolve over time we find that the gains from second sourcing are not so large as one might hope finally we reinterpret the second source as a raider and the breakout as a takeover we discuss the desirability of defensive tactics and obtain a rich set of testable implications concerning the size of managerial stock options the extent of defensive tactics the firm s performance and the probability of a takeover

migration and optimal income taxes abstract the issue addressed in this paper is the optimal taxation of incomes earned in the home economy and of incomes earned abroad when people can migrate as a preliminary the optimal taxation of home incomes when there is migration and no taxation of foreign incomes is discussed then in a more general setting we deal with optimal taxation of different kinds of labour when another kind of labour is not taxable and show how this bears on the taxation of foreign incomes the last sections of the paper analyse a simple model in which people choose between taxable labour at home taxable labour abroad and untaxable labour a condition is found implying that the optimal tax on foreign income is higher than on the home income of a person of equal utility

international transmission of the business cycle in a multi sector model abstract standard multi country models do not replicate important features of the international transmission of business cycles predicting cross country correlations of output and consumption which are respectively too low and too high in this paper we modify the supply side of a two country model by adding multiple sectors and trade in intermediate goods the model generates a higher cross country correlation of output than standard one sector models it also predicts cross country correlations of employment and investment that are closer to the data we analyze the relative impact of multiple sectors trade in intermediate goods imperfect substitution between domestic and foreign goods home preference capital adjustment costs and capital depreciation in order to pinpoint the features which move the model s predictions closer to the data

understanding investment irreversibility in general equilibrium miquel faig i introduction many forms of investment are irreversible a growing body of literature 1 has shown that irreversibility is important for firms investment decisions under uncertainty however we still know little about the consequences of investment irreversibility for the economy as a whole that is in general equilibrium learning about these consequences is not only important for a better understanding of capital accumulation it is also important for an understanding of the information that asset returns provide about the business cycle in fact recent papers by boldrin christiano and fisher 1995 beaudry and guay 1996 and jermann 1998 convincingly argue that impediments to the reallocation of capital are crucial to generate realistic dynamics for asset returns thus understanding the general equilibrium consequences of investment irreversibility is important to the theories of economic growth the business cycle and asset pricing in this article i advance an analytically tractable model to explore the consequences of investment irreversibility in general equilibrium the main contribution of this model to the existing literature is analytical tractability analytical results from the literature dealing with investment irreversibility in general equilibrium are scarce and mainly limited to general properties such as existence of solutions as in sargent 1980 and olson 1989 fortunately thanks to numerical simulations we know some of the effects of investment irreversibility in general equilibrium for example using an extension to the neoclassical growth model coleman 1997 documents that irreversibility significantly affects interest rates and it may increase aggregate investment even when no constraints are binding 2 in contrast firms behavioral analyses and the related competitive equilibrium model by leahy 1993 show that irreversibility typically discourages capital creation the model advanced in this paper helps to understand and to formalize why such contrast exists the model of this article extends the endogenous growth model found in barro 1990 the four main assumptions of the model are the following all production processes yield the same output which can be consumed or invested in many types of capital all factors of production are a type of capital the aggregate production function yields constant returns to scale preferences are homothetic and modeled along the lines of epstein and zin 1989 these preferences include as a special case the standard isoelastic time additive preferences but they allow to distinguish between the inter temporal elasticity of substitution and the inverse of the coefficient of relative risk aversion these two parameters play important and distinct roles in the analysis to attain strong analytical results the model in this article has to adopt the restrictive assumption that all factors of production are a form of capital however the model remains quite flexible to capture important elements of reality the model allows for many types of capital so some of them can be interpreted as human capital also the model allows great flexibility on the stochastic shocks affecting the production possibilities of the economy finally the model allows for the coexistence of irreversible and flexible types of capital with or without complementarities between them this diversity of capital types is important to generate endogenous interest rates and endogenous marginal products of capital also capital diversity allows for strongly binding irreversibility constraints even with positive gross investment as it has always been the model reveals that in general equilibrium there are three effects of irreversibility on aggregate investment the first is the obvious direct effect of preventing capital destruction in periods one may wish to consume part of the capital stock

bundling decisions by a multiproduct monopolist with incomplete information this paper analyzes bundling decisions of a rnultiproduct monopolist facing uncertain demand the monopolist sells his products using an auction mechanism and the market is analyzed as a game with incomplete information in which the buyers as well as the seller are strategic agents with a small number of buyers a profit maximizing seller will bundle all his output this makes buyers uniformly worse off compared to the case where the same monopolist does not bundle in the sense that any buyer is worse off regardless of his demand for the monopolist s outputs with a larger number of buyers the seller will have a tendency to unbundle his output and high demand buyers are worse off than they would be if the monopolist bundled his output low demand buyers on the other hand are always better off when the monopolist unbundles his output regardless of the number of competing buyers despite the fact that high demand buyers are the typical purchasers of the monopolist s output the net effect of increasing the number of buyers is greater market efficiency since bundling creates market inefficiencies both ex post and ex ante

temporary migration human capital and language fluency of migrants this paper investigates human capital investment of immigrants whose duration in the host country is limited either by contract or by their own choice the first part of the paper develops a model which distinguishes between temporary migrations where the return time is exogenous or optimally chosen the analysis has a number of interesting implications for empirical work some of which are explored in the second part of the paper the analysis focuses on language capital and tests the hypothesis that country specific human capital investments are sensitive to the duration in the host country s labour market the results show that the acquisition of language capital is sensitive to the intended duration in the host country

understanding the international mobility of chinese temporary workers using unique panel data on the temporary movement of chinese workers to 191 economies during 1992 2015 i investigate the patterns and determinants of labour mobility in the services trade i estimate a gravity model of labour mobility in two categories namely overseas labour services and overseas contracted projects i find that distance proxy for migration costs and income are not the most important determinants of the latter for overseas contracted projects the dispatch of workers is not driven by their pure economic aims but by the chinese government s policies and strategies such as its overseas project promotion policy furthermore i employ the difference in differences estimation method to investigate the impact of this policy upon labour mobility the results show that the policy of promoting overseas contracted projects has causal and positive effects on labour mobility in construction related sectors

coalitions incentives and risk sharing abstract this paper analyzes the effects of coalitional behavior in principal multiagent relationships with moral hazard and identifies cases where the principal prefers agents to form a coalition via side contracting it is shown that the principal can implement given efforts via non individualistic incentive contracts at a lower cost when the agents can monitor each other s efforts perfectly and hence coordinate their effort choice than when the agents behave independently permitting the principal to utilize more complex communication mechanisms does not alter the result for there is no coalition proof revelation mechanism improving the principal s welfare journal of economic literature classification number d82

tax policy in the presence of emigration recent policy and theoretical discussions of the effects of highly skilled migration from the underdeveloped countries the so called brain drain have focused on a proposal bhagwati 1972 to levy a supplementary income tax on those who migrate the proceeds of such a tax to be transmitted to the developing country of origin or to developing countries en bloc for developmental spending the welfare implications of such a tax were analyzed in an earlier paper of ours bhagwati and hamada 1974 in the context of a model of the country of emigration characterized by sticky wages and harrisstodaro 1971 type of unemployment in subsequent papers the tax has been analyzed also in the context of modified models still incorporating the unemployment phenomena by rodriguez 1975 and mcculloch yellen 1975 2 essentially these models analyze the impact of the income tax on emigrants incomes as arising primarily through the reduced differential

precautionary saving by young immigrants and young natives 1 introduction and literature review foreign born population accounted for approximately 9 of the total population residing in the united states by the mid 1990s and including their children they were responsible for approximately 51 of the u s population growth martin 1995 these dramatic changes in the u s population have prompted much economic research on the immigrant population but despite the great deal of attention that has been paid to the labor market progress of immigrants little is known about their saving and wealth accumulation patterns 1 many studies requiring information on the saving behavior of immigrants simply assume that immigrant savings parallel that of natives macurdy nechyba and bhattacharya 1998 however it may be the case that immigrants behave differently have different motives different opportunities and different needs with respect to saving and wealth accumulation vis a vis natives most of the limited literature on the saving behavior of immigrants is inspired by european and middle eastern guest worker migration and consequently is geared to the behavior of temporary migrants 2 three papers that focus on the saving behavior of immigrants in general are the papers by galor and stark 1990 carroll rhee and rhee 1994 and dustmann 1997 galor and stark note that immigrants and natives differ from one another in their migration probabilities because immigrants have ties to other countries it is more likely that they emigrate relative to the native born worker 3 using an overlapping generations model galor and stark show that the higher the probability of emigration the higher is the level of savings hence they predict immigrants save more than the native born dustmann models precautionary savings and assumes that immigrants maximize expected lifetime utility from consumption in the host and home country proportionally to the lifetime spent abroad and at home 4 under appropriate restrictions 5 dustmann shows that if labor markets in the home and host countries are uncorrelated immigrants will carry out more precautionary savings relative to a comparable native worker because immigrants will be subject to greater income risk in the host country 6 however it is also possible in dustmann s formulation to have immigrants engaging in less precautionary saving relative to native workers for example if economic conditions across the two countries are correlated immigrants could be subject to less lifelong income risk than natives given their ability to diversify away labor market risk by operating in two markets rather than just one as in the case of natives additionally if the risk preferences of natives and immigrants are different then the precautionary saving motive could be more or less pronounced in one group relative to the other all else equal carroll rhee and rhee 1994 use the canadian survey of family expenditures to compare saving behavior of immigrants to canada from different regions of the world they conclude that immigrant saving does not significantly differ by country of origin however they do find that recent immigrants save less than do canadian born and that immigrants saving behavior approaches the pattern of the canadian born over time overall the theoretical literature tends to favor the hypothesis that immigrants carry out more precautionary savings than natives which could result in immigrants accumulating more wealth than natives immigrants face greater uncertainty regarding their labor market participation labor market progress and health care coverage these factors along with geographic distance may make it more difficult to obtain financial support from family members in times of necessity requiring that immigrants maintain larger stocks of precautionary saving but dustmann s model in consonance with a widely held view also allows for immigrants to be more risk tolerant than natives since they are willing to undergo higher uncertainties and risks when they decide to migrate to a new country barsky et al

international migration with heterogeneous agents theory and evidence for germany 1967 2009 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

the work effort and the consumption of immigrants as a function of their assimilation positive self selection has been used to explain the superior economic performance of some immigrant groups even if immigrants and natives are identical however the former face different incentives in particular they bear costs not incurred by natives including monetary costs of moving costs of staying in touch with family and obligations to those left behind nonmonetary costs include stress and loss of location specific human capital the focus of this paper is on how these costs influence the decisions of immigrants relative to those of natives particular attention is given to the role of assimilation

estimating the impact of immigrants on the host country social security system when return migration is an endogenous choice in this paper i examine the impact of immigrants on the social security system in germany when return migration is an endogenous choice for this purpose i develop a dynamic stochastic model of joint return migration and saving decisions that accounts for uncertainty in future employment and income and estimate this model using a longitudinal dataset on immigrants from five different source countries i find that immigrants make positive net contributions to both the pension and unemployment insurance systems in germany regardless of their country of origin and age at entry moreover the magnitudes of the net contributions are remarkable for certain groups return migration plays a critical role in generating these positive net contributions in a counterfactual i examine how much exogenous modeling of the return decision which has been the practice of the literature so far changes immigrants net contributions such a restriction causes a serious misestimation of net contributions i also examine the impact of a counterfactual policy experiment in which financial bonuses are provided conditional on return to certain unemployed immigrants such a policy turns out to be ineffective in a number of dimensions