The Dynamics of Labor Migration When Workers Differ in Their Skills and Information is Asymmetric

Abstract: The theory of labor migration under asymmetric information in implemented to generate the following predictions. First, when workers in a profession constitute two skill levels - low skill and high skill - under asymmetric information bothtypes migrate (even though if information were symmetric, only the high skill workers would migrate). Subsequently, however, the high skill workers stay while the low skill workers return. With some supplemental structure, a non-screening device is identified that enables the receiving country to attract only high skill workers. Second, when workers in a profession constitute more than two skill levels, say four (without loss of generality), an implementation of the asymmetric information theory generates the following patterns: Migration is sequential, that is, it proceeds in waves. Each migration wave breaks into workers who stay as migrants and workers who return; within waves the returning migrants are the low skill workers. This pattern mimics the pattern pertaining to the two skill levels case. Ex ante, migration is always less selective than it is ex post. Finally, the average skill level of migrants is rising in the order of their cohort.