Out-migration and economic cycles

Out-migration concerns foreigners who decide to leave a country where they used to live. Taking advantage of the OECD bilateral IMS database, we analyze the short-run determinants of out-migration using a panel of Schengen countries between 1995 and 2011. We find that out-migration is counter-cyclical: foreign nationals tend to leave host countries with high unemployment, while they are likelier to stay in good times (i.e. low unemployment). Typically, a 10 % increase in the unemployment rate leads to a 5 % increase in out-migration. Thus, short-term economic fluctuations have the same qualitative effect as restrictive migration policies in economic downturns. However, we find mixed evidence for the role of economic cycles in the potential destination countries of those flows. Movers appear to be sensitive to unemployment changes in their country of origin, but they do not seem to be sensitive to business cycles in potential destinations.