A Land of Milk and Honey with Streets Paved with Gold : Do Emigrants Have Over-Optimistic Expectations about Incomes Abroad?

Millions of people emigrate every year
in search of better economic and social opportunities.
Anecdotal evidence suggests that emigrants may have
over-optimistic expectations about the incomes they can earn
abroad, resulting in excessive migration pressure, and in
disappointment among those who do migrate. Yet there is
almost no statistical evidence on how accurately these
emigrants predict the incomes that they will earn working
abroad. In this paper the authors combine a natural
emigration experiment with unique survey data on would-be
emigrants' probabilistic expectations about employment
and incomes in the migration destination. Their procedure
enables them to obtain moments and quantiles of the
subjective distribution of expected earnings in the
destination country. The authors find a significant
underestimation of both unconditional and conditional labor
earnings at all points in the distribution. This
underestimation appears driven in part by potential migrants
placing too much weight on the negative employment
experiences of some migrants, and by inaccurate information
flows from extended family, who may be trying to moderate
remittance demands by understating incomes.