Temporary Migration for Long-term Investment
In the presence of credit constraints, temporary migration abroad provides an effective strategy for workers to accumulate savings to finance self-employment when they return home. This paper provides direct evidence of this link and its effects on...
| Main Authors: | , , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2021
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/504291627493488985/Temporary-Migration-for-Long-term-Investment http://hdl.handle.net/10986/36040 |
| Summary: | In the presence of credit constraints,
temporary migration abroad provides an effective strategy
for workers to accumulate savings to finance self-employment
when they return home. This paper provides direct evidence
of this link and its effects on workers’ employment
trajectories by using a new, large-scale survey of temporary
migrants from Bangladesh. It constructs and estimates a
dynamic model that establishes connections between asset
accumulation and credit constraints, and, thus, between
workers’ migration and self-employment decisions.
Interlinked impacts also emerge from simulations of three
key policy interventions that target migration costs or
domestic credit constraints for entrepreneurship. Lowering
migration costs increases emigration, reduces the age at
which workers depart, and reduces the duration of their time
abroad, which together lead to higher savings and domestic
self-employment. Reducing the interest rate for
entrepreneurial loans reduces migration and savings levels,
undercutting the positive effects on business creation at
home. Correcting workers’ inflated perceptions about
overseas earnings potential reduces emigration rates and
durations, triggering a decrease of both repatriated savings
and self-employment in Bangladesh. The findings, which have
implications for migrant-sending countries, highlight the
need for policies to take into account the linkages between
migration and self-employment decisions. |
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