Migrant wages, remittances and recipient labour supply in a moral hazard model

Claire Naiditch (1) , Radu Vranceanu (2)

1 CES - Centre d'économie de la Sorbonne
2 ESSEC Business School

This paper analyzes the interaction between migrants income and remittances and between remittances
and the labor supply of residents. The model is cast as a two-period game with imperfect information
about the residents' real economic situation. Residents subject to a good economic situation may behave as if they were in a poor economic situation only in order to manipulate remitters' expectations. The latter, being aware of this risk, reduce the remitted amount accordingly. Therefore, in the equilibrium, residents who really are victims of the bad economic outlook, are penalized as compared to the perfect information set-up. In some circumstances, they can signal their type by drastically cutting working hours, thus further enhancing their precarity right when their economic situation is the worst.

Mots clés: Migrants; Remittances; Perfect Bayesian Equilibrium; Labour Supply; Signaling; Altruism

Domaines: Economies et finances

Claire Naiditch, Radu Vranceanu. Migrant wages, remittances and recipient labour supply in a moral hazard model. Economic Systems, 2009, 33 (1), pp.60-82. ⟨10.1016/j.ecosys.2008.07.003⟩. ⟨halshs-00318870⟩