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. (C) 1997 Published by Elsevier Science B.V.