Migrants now account for a considerable proportion of the labour force in many industrialized countries, and their labour market and other economic behaviour often differs from that of natives. Migrants clearly differ among themselves and from natives in terms of their past experience and often also in their future expectations. In Discussion Paper No. 947, Research Affiliate Christian Dustmann argues that differences in current behaviour between otherwise identical individuals may be strongly affected by differences in their future expectations. Migrants who intend to return to their home countries or will be forced to do so by legal restrictions will base their behaviour in the host country on the expected future characteristics of their home countries' economies.

A `return' migrant who expects the economic situation in his/her home country on return to be worse than in the host country has a lower reservation wage than an otherwise identical `permanent' migrant, and is therefore willing to accept jobs that pay lower wages or to supply more labour at a given wage. This implies that relaxing restrictions on the maximum length of stay for migrant workers may cause an upward shift in the general wage level, at least in those segments in which migrant workers are concentrated. Dustmann tests this hypothesis by estimating participation probability models in which the intention whether to remain permanently or temporarily is used only as an explanatory variable on data on female, married migrants in Germany. His results indicate that those who intend to remain temporarily have higher participation probabilities than those who intend to remain permanently. Several tests of the model's econometric specification show that these results are robust.

Differences in the Labour Market Behaviour Between Temporary and Permanent Migrant Women
Christian Dustmann

Discussion Paper No. 947, May 1994 (HR)