Emir Murathanoglu (University of Michigan)

When the Weather Turns: Coping With Risk Through International Migration in the Presence of Search Frictions

Emir Murathanoglu
University of Michigan

Abstract

I document how temporary international labor migration is used as a shock coping mechanism by studying migration responses to typhoons in the Philippines using administrative data on the universe of new migrant contracts. Typhoons increase international migration from affected municipalities for up to three years, but decrease new migrant cohort wages. This drop is driven by an increased share of migrants leaving for lower paying countries and occupations, even though educational attainment of migrant cohorts increase. These patterns are consistent with two frictions in overseas labor markets: search frictions and excess migrant supply at prevailing wages. With these frictions, typhoons lead to lower reservation wages and incentivize migrants to search for contracts in lower paying overseas markets with higher likelihood of securing a job. Strong international migrant demand dampens this response: typhoons lead to larger increases in migration without a proportionally large wage drop. Correspondingly, origin households receive more remittances in response to typhoons during periods of higher migrant demand. Overall, conditions and policies that increase availability of overseas contracts in the wake of shocks can lead to significant shock-coping gains for migrant origins.

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