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An Estimable Dynamic Model of Asset Accumulation and Return Migration

Murat G. Kirdar

This paper analyzes return migration and asset accumulation in a stochastic dynamic model using a longitudinal dataset on legal immigrants in Germany. Our model gives a number of implications about the level, timing and selection of return migration along with the savings profiles of immigrants. In addition, we examine how the return and savings behavior of immigrants vary according to their country of origin and demographic characteristics. The model is used to determine the impact of a number of counterfactual policy experiments on the composition of immigrants, such as changes in the unemployment insurance program and the payment of bonuses conditional on their employment status and duration of residence to encourage immigrants to return home. In addition, we assess the impact of counterfactuals in the macroeconomic environment, like changes in wages in Germany and in purchasing power parity between Germany and the source countries.

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