Joseph-Simon Görlach, Laurent Bossavie, Çağlar Özden and He Wang (Nov. 18, 2020)
Joseph-Simon Görlach (Bocconi University) and Laurent Bossavie, Çağlar Özden and He Wang (World Bank)
Temporary Migration and Entrepreneurship in Bangladesh
In the presence of credit constraints, temporary migration becomes an effective strategy for workers to accumulate capital and finance self-employment activities back home. This paper studies temporary migration episodes as explicit components of migrant workers' life cycle decisions where they face high migration costs as well as credit constraints to entrepreneurial activities. Using data from a large-scale survey of temporary migrants from Bangladesh, we construct and estimate a dynamic model of various components of the temporary migration decision process as well as their activities after return. We then simulate the effect of changes in migration costs, interest rates and employment conditions on various decisions such as migration duration and savings levels. Our findings imply that changes in migration costs and conditions abroad have important dynamic repercussions on the labor trajectories of workers over their entire life cycle, including their self-employment patterns after their return. Vice versa, better access to credit for entrepreneurs at home actually lowers the extent and duration of migration.