Subjective Well-Being Differentials and the Decision of Migrants of Different Origin to Stay in the Host-Country: Evidence from Germany

Studies which try to explain return migration are rare, especially using utility function framework. This might be due to the large variety of factors that shape the utility of return migration. This study proposes subjective well-being (SWB) differentials between migrants living in the host country and the mean SWB in their country of origin as a way of capturing the utility function of re-migration. Using data from the German Socio Economic Panel (SOEP) and the World Database of Happiness (among others), a sample of 9.712 migrants between the years 1998 until 2015, coming from 81 countries (overall 32.003 observations), is studied. The analysis is carried out in two steps: first, SWB differentials are calculated and their systematic variation across the countries of origin are explored in a comparative setting. Then, these SWB differentials are used as a proxy of utility gains to predict intentions for a permanent stay in Germany using a three level random intercept logit model (migrant-country-year) and controlling for a wide array of individual level and country level variables (income, education, age, GDP in country of origin, and more). The results indicate that the estimated SWB differentials perform in accordance with the utility-based theory. The proxy for utility is a strong predictor of intentions to permanently stay in Germany before and after a multitude of control variables on the individual and country level was included. The existence of a significant contextual effect is evidence that utility of living in Germany is linked to the country of origin and further shape a migrant’s intention to permanently stay. The results suggest that return-migration can be conceptualized with a utility framework and subjective well-being differentials are an appropriate way of capturing the utility function at work.