The Return Motivations of Legal Permanent Migrants: Evidence from Exchange Rate Shocks and Immigrants in Australia
- Legal permanent migrants in Australia are motivated to return to their home country by home country conditions.
- A 10% depreciation of a migrant’s home country currency leads to an almost 10% reduced probability that the migrant will return to her home country.
- Migrants seek to optimally time their return, rather than to decide whether to return, on the basis of favorable home country conditions.
- Results are consistent with the story that migrants return home not because they are target-earners, but because of life-cycle considerations.
Why do legal permanent migrants return to their home countries? How do home country conditions influence such a decision? This paper uses exogenous exchange rate shocks arising from the 1997 Asian Financial Crisis to distinguish between the motivations of Australian immigrants to return to their home country. A 10 percent favorable shock (a depreciation in a migrant’s home country currency) leads to an almost 10 percent reduced likelihood of return in a two year period. The effect is stronger for those with pre-existing intentions to return, weaker for those undecided, and zero for those who initially desired to stay. These results favor a life-cycle explanation for migrant behavior and reject the theory that migrants are target earners who seek to invest upon return home.