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Abstract
Migration is low for most European countries. But migration puts nevertheless
pressure on unfunded pension systems if those who pay contributions to an
unfunded pension system leave the country. This will lead to competition for
contributors and set a race to the bottom in motion. Growing integration of the
countries of the European Union will intensify this development.
In order to shed some light on the aspect of emigration from an industrialised
country by natives, we analyse who is most likely to react to these incentives. As
statistical information is thin with respect to emigration, we present estimations
about intended emigration from Germany. We nd that young individuals with an
above-average school degree are most likely to think about emigrating. But these
individuals are exactly those who are needed as contributors to the unfunded
pension systems. Reactions of national pension systems must therefore be
expected.
1
See Chapter 3.
2
According to Sinn (1998), the concept of marginal mobility is similar to the marginal concept
predominant on private goods markets where it is also marginal demand that drives the competitive
behaviour of rms and not intramarginal demand.
3
Examples of empirical analyses can be found in Beggs and Chapman (1988, 1990, 1991), Chiswick
and Miller (1985), Dustmann (1993), Greenwood and McDowell (1991), Mayer and Riphahn (2000),
and Schmidt (1997).
Qualitative Aspects of Migration 185
to the brain drain problem (for example, Hamada, 1996). So far, there are not
many studies which analyse emigrationin particular by nativesfrom
industrialised countries.
One reason for this observation might be that in general, information about
emigrationin contrast to immigrationis hard to nd. The US Census Bureau
has recently developed some techniques to estimate the number of emigrants,
which underlines the difculty of obtaining reliable emigration data.4 In Germany,
emigrants are legally obliged to give notice when leaving the country. These data
collected by the German Federal Statistical Ofce thus give an initial idea about
the quantity and quality of emigration from Germany. However, the number of
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The data for this analysis stem from the German Socio-Economic Panel (GSOEP)
which consists of about 6000 households.5 We use the waves 10 from 1993, 13
from 1996, 14 from 1997, and 15 from 1998 because these waves are the only ones
where individuals are asked about their intentions to emigrate. Wave 13 in
addition comprises information about the reasons for moving. We exclude
foreigners as they are self-selected in the sense that they have already displayed
4
See Bashir and Robinson (1994) for the foreign-born population and Fernandez (1995) for the US
born population.
5
See the Appendix A5 for some additional information about the GSOEP.
186 Unfunded Pension Systems: Ageing and Migration
Table 8.1: Description of the dependent variable and sample characteristics.
Mean and standard error are calculated for the values 1 never, and 4 yes, very much.
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Percentages may not add to 100% due to rounding. Source: Waves of 1993, 1996, 1997 and 1998
(GSOEP).
a
Mean 2.378; Std. error 0.909.
b
Mean 2.494; Std. error 0.873.
their mobility in at least one instance.6 As the gender can be expected to inuence
the propensity to move in different waysfor example, through stronger family
ties for women (Naskoteen and Zimmer, 1980) and through different educational
and professional careersthe sample will be subdivided into a female and a male
sub-sample. After excluding individuals with missing values for relevant
variablesmostly concerning the propensity to migrate and the schooling and
work history, the male sample population reduces to 9612 observations and the
female sample population to 9995 observations. Potential correlations in the error
terms due to the fact that the sample includes repeated answers from given
individuals in subsequent years are taken into account. Table A8.1 describes
sample characteristics for the variables used in the empirical analysis.
6
For an analysis of the migration propensity based on a sample of Germans and foreigners see
Uebelmesser (2004).
Qualitative Aspects of Migration 187
Table 8.2: Reasons of those with a positive propensity to migrate.
move yes, it depends or move yes, very much. Percentages may not add to 100% due to
rounding. Source: Waves of 1993 (GSOEP).
Table 8.2 gives an overview of the reasons for migration stated by those who
show a positive propensity to migrate.7 Better professional opportunities play an
important role for 42% of the men and for 24% of the women. This hints at
relevant differences in wages and/or employment probabilities in the destination
country relative to Germany. However, reasons which are not directly linked to
economic differences prevail. Sixteen percent of the women and 15% of the men
want to spend their retirement period abroad. The motivation to migrate is thus not
related to wage or employment differentials, although the general economic
situation in the destination country is important to judge the purchasing power of
the pension benets abroad.8
Better institutions for training and education are the reason given by 8% of the
women and 9% of the men with a positive propensity to migrate. Again, the
economic situation only plays a role in an indirect way when assuming that these
individuals hope to give themselves better job opportunities abroador at
homeafter having completed their studies abroad.9 For women, family reasons
are of importance in 13% of the cases compared to 3% of the cases for men. Here,
the economic situation indirectly inuences the decision to migrate when thinking
that those individuals may follow their partner or other family members who have
7
A more extensive discussion of the economic and non-economic reasons of the potential migrants can
be found in Uebelmesser (2004).
8
Note, however, that migration after retirement does not affect an unfunded pension system.
9
We do not have information about the intention of individuals to return after having completed their
education. See Dustman (1995, 1997) for an analysis of the long-run effects of return migrants on the
welfare state.
188 Unfunded Pension Systems: Ageing and Migration
migrated earlierpossibly for economic reasons. Thus, in general, the economic
situation in the destination country compared to Germany plays some role for the
propensity to migrateeither directly or indirectly.
Tables 8.3 and 8.4 show the breakdown of the responses for women and men
according to a number of personal, household and regional characteristics.
Various patterns are immediately apparent.
Variable Yes, very much Yes, it depends Probably not Never Total sample
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Individual data
Age ,20 95 (24) 152 (38) 108 (27) 41 (10) 396
Age 2029 372 (15) 940 (37) 942 (37) 297 (12) 2551
Age 3039 305 (10) 1040 (36) 1149 (40) 414 (14) 2908
Age 4049 175 (9) 728 (36) 792 (40) 301 (15) 1996
Age 5059 127 (10) 384 (31) 417 (34) 298 (24) 1226
Age 60 37 (4) 155 (17) 235 (26) 491 (53) 918
Married 508 (9) 2985 (33) 2333 (39) 1134 (19) 5960
Foreign partner 10 (11) 53 (59) 22 (24) 5 (6) 90
German partner 498 (8) 1932 (33) 2311 (39) 1129 (19) 5870
Not married 603 (15) 1414 (35) 1310 (32) 708 (18) 4035
Children 0 6 327 (10) 1129 (35) 1216 (38) 513 (16) 3185
Children 7 16 499 (10) 1770 (36) 1952 (39) 731 (15) 4952
No children under 16 697 (12) 1940 (34) 1901 (33) 1146 (20) 5684
West Germany 908 (13) 2558 (38) 2273 (34) 1030 (15) 6769
East Germany 203 (6) 841 (26) 1370 (42) 812 (25) 3226
Education
Elementary 304 (9) 898 (28) 1063 (33) 960 (30) 3225
Secondary 460 (10) 1534 (34) 1813 (40) 711 (16) 4518
Higher secondary 347 (15) 967 (45) 767 (34) 171 (8) 2252
University degree 154 (14) 490 (44) 383 (35) 81 (7) 1108
Occupational training 695 (10) 2301 (33) 2716 (38) 1350 (19) 7062
Occupation
Worker 104 (11) 271 (29) 353 (38) 203 (22) 931
Self-employed 44 (13) 145 (43) 106 (32) 41 (12) 336
Trainee 77 (17) 186 (41) 141 (31) 48 (11) 452
Employee 457 (11) 1472 (37) 1593 (40) 459 (12) 3981
Civil servant 35 (11) 140 (45) 113 (37) 22 (7) 313
Unemployed 101 (11) 257 (27) 353 (38) 226 (24) 937
Income
Yes 1053 (12) 3167 (36) 3352 (38) 1276 (14) 8848
Low net income 275 (13) 646 (31) 776 (38) 357 (17) 2054
Middle net income 463 (10) 1524 (34) 1731 (39) 741 (17) 4459
High net income 315 (13) 997 (43) 846 (36) 178 (8) 2335
No (retired) 58 (5) 232 (20) 291 (25) 566 (49) 1147
Values in parenthesis are percentages. Source: Waves of 1993, 1996, 1997 and 1998 (GSOEP).
Qualitative Aspects of Migration 189
Table 8.4: Intention to emigrate (men).
Variable Yes, very much Yes, it depends Probably not Never Total sample
Individual data
Age ,20 70 (17) 132 (33) 154 (38) 49 (12) 405
Age 2029 395 (16) 1074 (44) 782 (32) 184 (8) 2435
Age 3039 348 (12) 1166 (41) 1027 (36) 316 (11) 2857
Age 4049 170 (9) 731 (39) 750 (40) 231 (12) 1882
Age 5059 131 (10) 465 (35) 477 (36) 240 (18) 1313
Age 60 44 (6) 167 (23) 229 (32) 280 (39) 720
Married 528 (9) 2024 (36) 2110 (38) 899 (16) 5561
Foreign partner 16 (26) 33 (53) 11 (18) 2 (3) 62
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German partner 512 (9) 1991 (36) 2099 (38) 897 (16) 5499
Not married 630 (16) 1711 (42) 1309 (32) 401 (10) 4051
Children 0 6 327 (10) 1129 (35) 1216 (38) 513 (16) 3185
Children 7 16 489 (12) 1567 (39) 1511 (37) 499 (12) 4952
No children under 16 748 (13) 2325 (40) 1994 (34) 819 (14) 5886
West Germany 927 (14) 2715 (42) 2127 (33) 737 (11) 6506
East Germany 231 (7) 1020 (33) 1292 (42) 563 (18) 3106
Education
Elementary 381 (11) 1082 (33) 1146 (35) 712 (21) 3321
Secondary 371 (11) 1248 (37) 1312 (39) 400 (12) 3331
Higher secondary 406 (14) 1405 (47) 961 (32) 188 (6) 2960
University degree 221 (12) 859 (47) 601 (33) 132 (7) 1813
Occupational training 758 (11) 2507 (36) 2589 (38) 1046 (15) 6900
Occupation
Worker 269 (10) 886 (34) 1021 (39) 458 (17) 2634
Self-employed 99 (16) 259 (43) 196 (33) 49 (8) 603
Trainee 75 (15) 195 (38) 188 (37) 55 (11) 513
Employee 344 (12) 1331 (45) 1082 (36) 213 (7) 2970
Civil servant 85 (12) 287 (42) 241 (35) 71 (10) 684
Unemployed 85 (11) 253 (33) 272 (36) 152 (20) 762
Income
Yes 1078 (12) 3503 (40) 3135 (36) 990 (11) 8706
Low net income 225 (10) 782 (35) 885 (40) 322 (15) 2214
Middle net income 563 (13) 1672 (40) 1484 (35) 469 (11) 4188
High net income 290 (13) 1049 (46) 766 (32) 199 (9) 2304
No (retired) 80 (9) 232 (26) 284 (31) 310 (34) 906
Values in parenthesis are percentages. Source: Waves of 1993, 1996, 1997 and 1998 (GSOEP).
Men in general are more likely to consider emigrating than women and younger
individuals think more often about leaving Germany than older individualswith
the exception of men under 20.
A higher school degree makes thinking about emigrating more likely for men
and women. Occupational training and a university degree, however, do not
190 Unfunded Pension Systems: Ageing and Migration
further increase the probability compared to a secondary degree or a higher
secondary degree, respectively. Concerning occupation as an important factor, we
nd for men and for women that employed people in general are more likely to
consider emigrating than the unemployed and retired. For the specic forms of
occupations considered explicitly, probabilities are very high for most of the
occupationsincluding self-employed and civil servants. In addition, the
probability to think about emigrating increases with income levels.10
Single men and women are more likely to consider emigrating than those who
are married to a German partner, while those with a foreign partner show a higher
propensity to emigrate. Children, however, do not play an important role in the
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Given the few actual emigrants in the GSOEP, and given the fact that in general
information about emigrationin contrast to immigrationis hard to nd, the
variable on the intention to move allows an approximation of the underlying data.
As Manski (1990, p. 935) states, intentions data do potentially convey
information about behaviour.
To get a feeling for the reliability of the data of the GSOEP, we compare them
with similar data from the study on Performance of the European Union Labour
Market by the European Commission (1995). In this study, individuals are asked
whether they would be willing to work in an EC member state different from the
one of which they are a national (Table 8.5). Thirty-four percent of the men and
21% of the women gave a positive answer.
This allows us to compare the results of the two data sets at least indirectly. If
we only consider data from the 10th wave (1993) of the GSOEP with information
about the reasons to move, we nd that 22% of the men and 11% of the women
name better job opportunities abroad as a possible reason to think about
emigrating.11 In both data sets, men are more willing to migrate for professional
reasons than women. It is not surprising that the numbers from the GSOEP are
smaller than those in the study of the European Commission (1995), given the fact
10
For those individuals without any (information about) net wage income, we have simulated net wage
income using the Heckman procedure (1979).
11
Ratio of those who name better job opportunities as the reason to move (Table 8.2) to all
individuals (2489 women and 2420 men) of wave 1993.
Qualitative Aspects of Migration 191
Table 8.5: Willingness to work in a foreign EC State.
Total 28 72
Of which
Men 34 66
Women 21 79
that in the GSOEP individuals have to choose the most likely reason among
several reasons so that other reasons might crowd out work-related reasons.12
Taking this into account, one can state that the order of magnitude is comparable.
It is, however, still necessary to give an explanation as to how one can reconcile
the different orders of magnitude of the statistical information of the German
Federal Statistical Ofce (see Chapter 3) and the responses in the GSOEP and the
survey of the European Commission. For this, we break down the responses into
age groups. From the GSOEP data (Tables 8.3 and 8.4), we see that the propensity
to emigrate (move yes, very much or move yes, it depends)
decreases with age for men and women, with few exceptions. For women, it is
62% for those under 20 and decreases for the 20 to 59-year-old from 52 to 41%.
Women aged 60 and over are less likely to consider emigrating (21%). The pattern
is very similar for men although the level of those who consider emigrating
is higher compared to women except for men under 20 (50%). For the 20 to
59-year-old, the level decreases from 60 to 45% and drops to 29% for those aged
60 and over.13
The observations from the German Federal Statistical Ofce (Statistisches
Bundesamt, 2000) are quantitatively different but not qualitatively. The absolute
number of emigrants is much lower than what one would expect from the answers
to the willingness-to-migrate question in both surveys. In 1993, only 86,619
Germans emigrated and in 1996, 1997 and 1998, the volumes were only slightly
higher with 118,430, 109,903 and 116,403 emigrants, respectively. If we
breakdown the data by age groups (Table 8.6), we nd, however, a similar
prole for intended and real emigration. The data from the German Federal
Statistical Ofce show a relative increase in emigration up to the age of 25 30
12
See Table 8.2 for the other reasons.
13
The study of the European Commission (1995) conrms this general trend. The willingness to work
abroad is highest for those below 31 years with 39% and decreases to 27% for the 3149-year-old and
to 15% for the 50-year-old and older individuals.
192
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Absolute Per 1000 of Absolute Per 1000 of Absolute Per 1000 of the Absolute Per 1000 of
number the age group number the age group number age group number the age group
16
Burda et al. (1998) follow a similar approach in their analysis of the intention to migrate from East to
West Germany.
17
See Appendix C8 for a short description of the probit model.
Qualitative Aspects of Migration 195
Table 8.7: Simulation results (women).
Reference categories are elementary degree, East German residence, not married and low net income.
***, ** and * denote statistical signicance at the 1, 5 and 10% level, respectively (see Table B8.1
most extensive estimation).
the propensity to move to decrease with age as the shorter payoff period of the
human capital investment decreases the net gains of migrationat least if
migration is considered for economic reasons.18 The coefcients for the age
variables are signicant at the 10% level in the female sub-sample but not in
18
But the human capital theory cannot explain migration after retirement. For those individuals who
think about emigrating in order to spend their years as retirees abroad, the willingness to migrate is
supposed to increase with age.
196 Unfunded Pension Systems: Ageing and Migration
Table 8.8: Simulation results (men).
Reference categories are elementary degree, East German residence, not married and low net income.
***, ** and * denote statistical signicance at the 1, 5 and 10% level, respectively (see Table
B8.1most extensive estimation).
the male sub-sample. As to the marginal effect, an increase in the age of the
individual increases the probability of staying in Germany and decreases the
probability of migrating. Compared to a 38-year-old, the alternative never
becomes 171% more likely for a 52-year-old woman and 52% more likely for
a 52-year-old man whereas the probability for the alternative yes, very much
Qualitative Aspects of Migration 197
decreases by 318% for women and 43% for men.19 The rather low signicance
of the effects hint at other potential reasons for thinking about migrating which
are not captured by the human capital theory, e.g. joining friends and family
members or emigrating in order to spend the years as retirees abroad.
As we focus on emigration from an industrialised country, the propensity
to migrate should increase with the years of education and training (Borjas,
1996). First of all, the geographic region which makes up the relevant labour
market is larger for highly educated individuals than for less educated ones.
Second, highly educated individuals might be more efcient at learning about
employment opportunities in alternative labour markets which reduces
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migration costs. Last but not the least, higher education implies better
knowledge of foreign languages which is an essential prerequisite for economic
and social integration.20 The extent to which human capital is transferable from
the home country to the destination country depends in many cases on general
communication skills. The simulation shows that the signicant school and
university variables have effects in the expected direction. Holding a higher
secondary degree increases the probability for the yes, very much alternative
by 77% (47%) in the female (male) sub-sample and decreases the probability
for the never alternative by 61% (45%) compared to an elementary degree.
Holding a university degree has a small signicant effect on the propensity to
migrate for women, but does not have a signicant effect for men.
Occupational training, however, is without any signicant inuence in both
sub-samples.
The occupational situation plays a signicant role for a self-employed and
for an employee in the female sub-sample and for a worker, a trainee, a
civil servant, an unemployed and a self-employedalbeit at the 11%
signicance levelin the male sub-sample. Being self-employed positively
inuences the probability to migrate for women and men. It seems, therefore, that
the entrepreneurial spirit of the self-employed outweighs the counter-arguments
brought forward by Naskoteen and Zimmer (1980).21 For civil servants and
unemployed individuals in the male sub-sample, the effect is signicant and
negative, which implies that both groups are less likely to migrate in order not to
19
This huge effect is partly caused by the fact that a change in age by 14 years (one standard deviation)
is considered.
20
See, for example, for the relevance of language skills for social integration Chiswick and Miller
(1995) and for economic integration Dustmann (1994).
21
Naskoteen and Zimmer (1980) argue that self-employment should lead to a smaller propensity to
move as the self-employed are less susceptible to promotion opportunities.
198 Unfunded Pension Systems: Ageing and Migration
lose the safe job at the government or the claims of the unemployment insurance,
respectively. Apparently, unemployed individuals are afraid to forego their
insurance claims, although it might be worthwhile to consider migrating if the
probability of nding a suitable job abroad, i.e. the expected income abroad, is
sufciently high.
The level of the wage income does not signicantly inuence the propensity to
emigrate, the only exception being no income (retired) in the female sub-sample,
which has a negative effect.
As to the private environment, the partner variable for those who are married
to a German should have a negative impact on the propensity to move abroad as
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22
See Mincer (1978) for an analysis of migration decisions of families.
Qualitative Aspects of Migration 199
who still live in East Germany. The state unemployment rate, however, has no
signicant effect.
8.3. CONCLUSION
In order to shed some light on a so far rather neglected aspect of migration, namely
emigration from an industrialised country by natives, we determine the
characteristics of an individual and his or her environment which positively or
negatively inuence the propensity to migrate. It is important to know more about
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individuals by scaling down the pension system and reducing thus in a twofold
way the burden for contributors, i.e. through a reduced system and more
contributors, without hurting the pensioners too much, thanks to the increased
number of contributors. And again, immigration and emigration are just different
sides of the same coin as the attempt to attract young and highly skilled
immigrants is identical to the ght to hold back the potential emigrantsboth
leading to a likely race to the bottom of inter- and intragenerationally
redistributive activities.23
In Chapter 9, we will focus on the possible competition for mobile individuals
among European countries which might be intensied by the growing integration
within the European Union. The effect of migration on the nancial sustainability
of unfunded pension systems depends on the distribution of competencies at the
national and European level. We will, therefore, analyse in detail intra-European
migration with respect to efciency and distribution against the background of
European regulations.
23
Immigrants from non-European countries may react even more strongly to differences in the
economic conditions in individual European countries. Their (differential) mobility is very high as they
need to choose only the destination country given that they have already decided to move (Sinn, 1998).
Qualitative Aspects of Migration 201
Table A8.1: Descriptive statistics.
Mean SD Mean SD
Individual data
Age 38.842 14.099 38.323 13.408
Residence: West Germany 0.677 0.468 0.677 0.468
Married 0.596 0.491 0.579 0.494
Married to German partner 0.587 0.492 0.572 0.495
Married to foreign partner 0.009 0.094 0.006 0.080
Children 0 6 0.170 0.375 0.155 0.362
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Source: Waves of 1993, 1996, 1997 and 1998 of the GSOEPexcept for Statistisches Bundesamt
(1994, 1999a) for the unemployment rate.
a
Variables indicating the highest degree obtained by the individualscorresponding in the German
system to Hauptschule, Realschule and Fachoberschule/Gymnasium, respectively.
b
Omitted in the estimation to avoid multicollinearity.
c
Low net income referring to the rst quartile of the wage distribution and high net income to the fourth
quartile.
202
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Variable Coefcient Std. error Coefcient Std. error Coefcient Std. error
***, ** and * denote statistical signicance at the 1, 5 and 10% level, respectively. Reference categories are elementary degree, East German
residence, not married and low net income.
203
204
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Variable Coefcient Std. error Coefcient Std. error Coefcient Std. error
***, ** and * denote statistical signicance at the 1, 5 and 10% level, respectively. Reference categories are elementary degree, East German
residence, not married and low net income.
205
206 Unfunded Pension Systems: Ageing and Migration
Let ypij be a continuous, latent variable which represents the attitude towards
emigration of individual i in the region j: Assume that ypij is a linear function of Xij
and Zj ; parameters b and g; and a stochastic term uij such that
ypij X 0ij b Z 0j g uij C8:1
The unobserved variable ypij is represented by a variable yij which is related to the
four categories in the following way
8
> 1; iff ypij # l1
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>
>
>
>
< 2; iff l1 , ypij # l2
yij C8:2
>
> 3; iff l2 , ypij # l3
>
>
>
:
4; iff ypij . l3 ;
where ll ; l 1; 2; 3; are unobservable thresholds to be estimated. With the
standard normal distribution F; the probabilities for an individual to be part of the
four categories are given by
Pry 1 Fl1 2 X 0 b 2 Z 0 g;
Pry 4 1 2 Fl3 2 X 0 b 2 Z 0 g:
For all probabilities to be positive, we need
l1 , l2 , l3 : C8:4