international migration with capital constraints: interpreting migration from the netherlands to...

International migration with capitalconstraints: interpreting migration from theNetherlands to Canada in the 1920s

Alex Armstrong and Frank D. LewisDepartment of Economics, Queen’s University

Abstract. An inability to borrow affected migration from Europe to North America.This capital constraint is formalized with a life-cycle model, where agents jointly choosehow much to save, the optimal period to finance migration, and whether to migrate.Using a life-cycle model we show that preference for the home country, the period ofadjustment after arrival, and the direct cost of migration affect the savings of migrants,age at migration, and who migrates. These results are discussed in light of wages inCanada and the Netherlands, and the characteristics of Dutch immigrants drawn fromship passenger manifests. Capital constraints delayed migration and help explain the largewage gap between the Netherlands and Canada. JEL classification: J61, N32, N34

Migration internationale en presence de contraintes sur l’acces au capital : une interpretationde la migration des Pays-Bas vers le Canada dans les annees 1920. Une incapacite a em-prunter a affecte la migration de l’Europe vers l’Amerique du Nord. Cette contrainte surl’acces au capital est formalisee a l’aide d’un modele de cycle de vie ou les agents choi-sissent conjointement combien epargner, la periode optimale pour financer la migration,et le choix de migrer ou non. A l’aide d’un modele de cycle de vie, on montre que lapreference pour le pays d’origine, la periode d’ajustement apres l’arrivee, et le cout directde la migration affectent l’epargne des emigrants, l’age auquel ils migrent, et qui emigre.Ces resultats sont discutes a la lumiere des salaires au Canada et au Pays-Bas, et descaracteristiques des immigrants hollandais tirees de listes de passagers de bateaux. Lescontraintes sur l’acces au capital ont retarde la migration et aident a expliquer le grandecart entre les salaires en Hollande et au Canada.

Versions of this paper were presented at Harvard, Lakehead, Queen’s, Rutgers, and Yaleuniversities and at the World Economic History Conference (Utrecht, 2009) and the CanadianEconomic Association meetings (Toronto, 2009). For comments and advice we are especiallygrateful to Charlie Beach, Alan Green, and Ian Keay. We also thank Laura Swan, ScottEdmonds, and Odette Melvin for research assistance. This work was supported by the SocialSciences and Humanities Research Council of Canada (Standard Research Grant F.L.;Bombardier Canada Graduate Scholarship A.A.). Email: [email protected]

Canadian Journal of Economics / Revue canadienne d’Economique, Vol. 45, No. 2May / mai 2012. Printed in Canada / Imprime au Canada

0008-4085 / 12 / 732–754 / C© Canadian Economics Association

International migration with capital constraints 733

1. Introduction

Migration from Europe to North America has been dominated by two relatedquestions: what were the characteristics of the migrants, and how well did theyperform after arrival? It is the second question that has received more attention.George Borjas, Barry Chiswick, and Joseph Ferrie are central contributors to aliterature that describes patterns of immigrant earnings and wealth in the UnitedStates, Borjas and Chiswick for the twentieth century and Ferrie for the nine-teenth century, while Abbott and Beach (1993), Baker and Benjamin (1994), andGreen and MacKinnon (2001) have considered immigrant earnings in the Cana-dian context.1 The effect of immigrant characteristics on their subsequent per-formance is certainly one element of the discussion, but some research has dealtspecifically with what determined the characteristics of arriving immigrants.2

Underlying this work is the question: why do people emigrate? Some may havebased their decision on other than the expectation of higher incomes; but, in thecase of the mass migrations from Europe to North America in the late-nineteenthand early twentieth centuries, economic motives were central. The decision toemigrate has been treated as variants of a model based on the expected returnfrom migration (see, e.g., Massey et al. 1993):

E[R] =∫ T

0{E[YR(t)] − E[YH(t)]}e−rtdt − C, (1)

where R is the net return from migration; YR,H is income in the receiving, homecountry; C is the cost of moving; 0 is emigration time; T is future lifetime; r isthe discount rate; and E[·] is the expected value of a variable. In each period adecision is made about whether or not to emigrate. Once the expected net returnfrom migration, E [R], is positive, the individual emigrates. If the expected returnfrom emigration is never positive, the individual remains in the home country.3

Implicit in equation (1) is the assumption that potential migrants can acquirethe funds to cover the cost of the move. This treatment may be appropriate foranalysing recent migrations, but there is considerable work on earlier populationflows that argues that raising the necessary funds was a serious obstacle. In thispaper we formalize the capital constraint in the context of a life-cycle modelwhere agents jointly choose how much to save, the optimal period to financemigration, and whether to migrate. The implications are discussed in light ofthe evidence on migration from the Netherlands to Canada in the 1920s. Our

1 For a review of the literature on immigrant earnings, see Borjas (1994). Chiswick (1978, 2000)also has written extensively on immigrant earnings. Ferrie (1994, 1997) analyses the economicperformance of immigrants in the pre-Civil War period. Green and MacKinnon (2001) look atevidence from the early twentieth century; Abbott and Beach (1993) and Baker and Benjamin(1994) write on the postwar experience.

2 Greenwood (2007) focuses on the age of immigrants to the United States in the late nineteenthcentury.

3 Chiswick’s (2000) approach is much the same, although his model does not include uncertainty,and future lifetime is treated as infinite.

734 A. Armstrong and F.D. Lewis

approach allows us to account for the large wage gap between the two countriesand helps us explain the characteristics of Dutch immigrants as revealed by thepassenger lists of arriving ships.

During the seventeenth and eighteenth centuries more than half of the free im-migrants to the Thirteen Colonies came as indentured servants, an arrangementthat emerged to deal with a borrowing constraint faced by low-wage workers inEurope, as David Galenson and Farley Grubb have pointed out.4 Not having thefunds pay for their passage and unable to borrow against their future earnings,workers signed indenture contracts that were sold in America to cover the cost oftheir passage. Simone Wegge’s (1998a, b) work on ‘chain migration’ is not specif-ically about capital market constraints, but her finding that emigrants from theGerman principality of Hesse-Cassel were strongly influenced by the presenceof family and friends in America is evidence that, in the mid-nineteenth cen-tury, access to immediate support was an important determinant of who wouldmigrate.

The borrowing constraint as a barrier to emigration is raised explicitly byTimothy Hatton and Jeffrey Williamson both in the introduction to their editedvolume on international migration and in The Age of Mass Migration (Hattonand Williamson 1994, 8–11; 1998).5 Moreover, comparisons of wages in Europeand America during the late nineteenth and early twentieth centuries suggestthat capital constraints played a major part in the migration decision. In 1870,for example, wages were about 70% higher in the United States than in Britain,100% higher than in Germany, and 340% higher than in Italy (Williamson 1995,154–6).6 Contrast these figures with the sort of equilibrium differentials one mightexpect in a world where migrants received a normal return on their moving costs.If migration costs were equivalent to annual earnings in the sending country,amortizing these costs at 10% over a period of 35 years would give rise to wagedifferentials of just 10% (Lewis 2001, 176).

The expectation of higher incomes attracted most immigrants, but becausemany had to finance their move by saving, any decision about migrating wouldhave been made before the actual migration date. Thus, their decision was basednot just on income after the move, but also on consumption before they migrated.A wealth of information on European emigrants has been compiled and analysedmost recently by Greenwood (2007, 2008), who examines the age compositionof migrants to the United States in the late nineteenth century. And for earlytwentieth-century Canada, Green and Green (1993) and Green and MacKinnon(2001) have analysed the age and occupational composition of immigrants usingevidence from ships’ manifests. We also draw on the immigration passenger listsof ships that arrived in Canadian ports, where we consider Dutch immigration

4 There is now a considerable literature on indentured servitude as a means of facilitatingmigration. See, for example, Galenson (1981) and, among his many publications on indenturedservitude, Grubb (1985, 1986).

5 Faini and Venturi (1994) also emphasize the role of financial constraints in limiting migration.6 Hatton and Williamson (1998, 35), who document the change in the ratio of real wages in

sending and receiving countries over the period 1850 to 1913, report similar results.


over the period 1925 to 1929. The passenger lists for these years include moreinformation than appears on the earlier manifests, including the relationship ofthe immigrant to the contact person in Canada, cash on arrival, and a statementof whether the immigrant paid their own fare. This information bears directly onthe questions of age at migration and the savings of immigrants.

2. A life-cycle model of migration with imperfect capital markets7

A potential emigrant faces two related decisions: whether and when to migrate.If the wage is higher in the receiving country and capital markets are perfect,migrants will leave at the start of their (working) lives, but if migrants are unable toborrow, they must first save enough to cover the costs of the move. The migrationdecision thus includes the period over which to save. We formalize the decisionto migrate with a life-cycle model, where lifetime utility of the non-migrant is

UH =∫ T

0{u[(c(t)] + τ }e−ρtdt, (2)

where T is lifetime, u is per period utility, c is consumption, τ is the per periodutility benefit of remaining in the home country, and ρ is the pure rate of timepreference. Because the emigrant loses the extra benefit of remaining in the homecountry after migrating, their lifetime utility is given by

UM =∫ t0

0{u[c(t)] + τ }e−ρtdt +

∫ T

t0

u[c(t)]e−ρtdt, (3)

where t0 is migration time. There is no non-labour income initially and the wagedepends on whether the agent is in the home or receiving country. Given a movingcost, K , the income stream over the lifetime is given by

y(t) =wH

wH − K

wR

0 ≤ t < t0

t = t0

t0 < t ≤ T, (4)

where wH , wR is the wage in the home, receiving country.8 There is no borrowing,implying that cumulative consumption can never exceed cumulative income.

∫ n

0c(t)e−rtdt ≤

∫ n

0y(t)e−rtdt, 0 ≤ n ≤ T, (5)

7 See Lewis (2001) for an analysis of farm settlement in Upper Canada (Ontario) that uses asimilar approach. For an analysis of return migration where saving has a key role see Djajic(2010).

8 In this formulation the wage is assumed to be constant. An alternative approach is to assumethat, after migration, the wage of the migrant increases over time until it equals, or possiblysurpasses, the wage in the receiving country.


where r is the discount rate. Because of the borrowing constraint, the consump-tion decision can be segmented into the period prior to and the period followingmigration. Prior to migration, consumption is limited by wages in the homecountry and the savings required to meet the costs of emigrating. In this period,the optimization decision is given by

maxc(t)

UM0 =∫ t0

0u[c(t)]e−ρtdt + λ

{∫ t0

0[wH − c(t)]e−rtdt − Ke−rt0

}. (6)

The first-order conditions yield the solutions:

u′[c∗(t)] = u′[c∗(0)]e(ρ−r)t, and 0 ≤ t ≤ t0 (7)

∫ t0

0[wH − c∗(t)]e−rtdt = Ke−rto , (8)

where c∗(t) is optimal consumption at time, t. Equation (8) requires that cumu-lative savings at migration time, t0, equals the cost of migration. In the secondperiod, t0 to T , the agent chooses optimal consumption based on the wage inthe receiving country. The optimization solution takes much the same form asequation (7).9 Finally, migration time is chosen to maximize lifetime utility underthe assumption that the agent chooses the optimal consumption paths duringthe periods before and after migration:

max UMt0

=∫ t0

0{u[c∗(t)] + τ }e−ρtdt +

∫ T

t0

u[c∗(t)]e−ptdt. (9)

The first-order condition can be expressed as∫ t0

0u′[c∗(t)]

dc∗(t)dt0

e−ρ(t−t0)dt + τ = u[c∗(t+0 ) − u[c∗(t−0 )], (10)

where t0− applies to the home country and t0

+ to the receiving country.10 TheLHS of equation (10) represents the increase in utility from postponing migration.By migrating later, the emigrant has a longer period to save the moving cost, K .This implies an increase in consumption every year prior to migration; that is,dc∗(t) / dt0 > 0. There is a further increase in utility, τ , if there is a comparativeamenity value of remaining in the home country. Offsetting these gains (RHS)

9 Since the wage is constant and it is assumed that the discount rate, r, is at least as great as thepure rate of time preference, ρ, the borrowing constraint is not binding because the immigrantinitially will be saving rather than borrowing. If, more realistically, it is assumed that wages arerising, then it is likely that the borrowing constraint would bind during the initial years aftermigration. This possibility is addressed below.

10 Where r �= ρ, the RHS has an additional (small) term representing the effect of postponingmigration on consumption after t0.


FIGURE 1 Consumption and wages (migration at time t0)NOTE: wH,R is the wage in the home, receiving country; cH,I is consumption of the non-migrant,migrant.

is the loss in utility because consumption in the home country is less than in thereceiving country. The decision to migrate requires that lifetime utility, assumingmigration is at the optimal time, is at least as great as lifetime utility if the persondoes not migrate:

∫ t0

0{u[c∗(t)] + τ }e−ρtdt +

∫ T

t0

u[(c∗(t)]e−ρtdt ≥∫ T

0u{[C∗

H(t)] + τ }e−ρtdt, (11)

where c∗H(t) is optimal consumption of the non-migrant. Figure 1 illustrates

the pattern of wages and consumption for the case where the discount rate, r,equals the pure rate of time preference, ρ.11 The decision to migrate is based ona comparison of the consumption profile of the migrant, which has consump-tion below the home-country wage, wH , prior to migration and equal to thereceiving-country wage, wR, after. The non-migrant has constant consumption,wH , throughout their lifetime.

A cost of emigrating was the forgone earnings associated with the trip. Forthose with a job waiting for them, the time would have been relatively brief, butsome migrants would have faced a much longer period before they found em-ployment, or employment appropriate to their skills. To allow for this possibilitywe consider a version of the model where there is a gap, a, between the timethe migrant arrives in the receiving country and when they begin receiving wage,

11 If r equals ρ, consumption is constant during the periods before and after migration.


FIGURE 2 Wages and consumption with an adjustment periodNOTE: See text and note to figure 1.

wR. The optimizing emigrant will now save enough to cover not just the cost ofmoving but also the cost of consumption during the period from t0 to t0 + a. Itwould have been unusual for a new immigrant to have no source of income, soa positive initial wage, wI , is assumed that is lower than wH , the home countrywage. Letting t1 = t0 + a, the first-order condition for optimal migration time(replacing equation 10) is

∫ t1

0u′[c∗(t)]

dc∗(t)dt0

e−ρ(t−t1)dt + τeρa = u[c∗(t+1 )] − u[(c∗(t−1 )], (12)

where∫ t1

0c∗(t)e−rtdt =

∫ t0

0wHe−rtdt +

∫ t1

t0

wI e−rtdt − Ke−rt0 . (13)

The pattern of consumption for r = ρ is illustrated in figure 2. Note that aftertime, t0, it is optimal for the emigrant to continue consuming at the same ratedespite the lower wage.

3. Dutch immigration to Canada, 1925–29

European immigration to Canada peaked just prior to World War I. From May1912 to May 1913 there were over 400,000 arrivals. Part of this wave was drivenby the Dominion Government’s homestead policy of offering 160 acres of prairie


land to newcomers. Between 1901 and 1914 more than 70 million acres werealienated (Canada, Dominion Bureau of Statistics 1928, 192). But migration toQuebec and Ontario was substantial as well. There was virtually no immigrationduring the war, and in the 1920s the Department of Immigration and Colo-nization introduced measures aimed at restricting immigrants other than thosewilling to be farmers or to work as farmhands.12 At the same time, the highly re-strictive immigration quotas introduced by the United States in 1921 and then in1924 made Canada a more attractive destination for Europeans. There was littleDutch migration to Canada in the early 1920s, but in 1924 Dutch immigrationjumped to over 1,000, and from 1926 to 1929 more than 2,000 immigrants peryear entered Canada.

The Department of Immigration and Colonization, the Department of theInterior with the support of the Canadian Pacific Railway (CPR), the CanadianNational Railway (CNR), and various transatlantic shipping lines actively pro-moted Dutch immigration. The CPR and CNR each had a full-time agent in theNetherlands, who helped recruit Dutch immigrants. In most cases, agents wouldnot directly arrange employment in Canada, but they would put them in con-tact with provincial employment agencies and provide letters of introduction forprospective employers. In the Netherlands, several public and semi-public insti-tutions also promoted emigration. The Netherlands Emigration League (NEL),formed in 1913 with the backing of the Dutch Ministry of Agriculture, providedinformation to prospective emigrants about labour market and settlement condi-tions in North America. The Central Emigration Foundation Holland (CEFH),founded in 1923, took a more active role. Operating on both sides of the At-lantic, it offered post-arrival assistance, such as job placement and translationservices. The CEFH also provided new immigrants with short-term cash loans inemergency situations. These societies operated in parallel to a number of privateoverseas recruitment agencies.

4. Wages in Canada and the Netherlands

The wage differentials between Europe and the United States in the late nine-teenth century far exceeded what would be expected if migrants could have

12 Orders-in-Council P.C. 2668 (July 26, 1921) and P.C. 183 (January 31, 1923) stipulated that withthe exception of British subjects arriving from certain countries, and U.S. immigrants, theintention to pursue agricultural work was a condition of acceptance. As well, section 38 (c) ofthe Immigration Act gave great latitude to immigration authorities, allowing them to rejectthose from countries who ‘are deemed undesirable owing to their peculiar customs, habits,modes of life and methods of holding property.’ The conditions were vague until 1928, when aselect committee of the House of Commons designated a list of preferred countries. W.J. Egan,deputy minister of immigration, testified that the rules were being interpreted more flexibly forsome countries; indeed, one purpose of the committee was to bring clarity. The reportdesignated a list of preferred countries. These were the countries of Northern Europe, includingthe Netherlands. But even before 1928, Dutch immigrants had been treated favourably. Canada,Select Standing Committee on Agriculture and Colonization 1928, vi, 22–4.


borrowed their moving costs, and the same was true during the early twentiethcentury. For the 1920s we have from the International Labour Review detailedinformation on wages and prices in a broad range of countries. These data havebeen exploited by Williamson (1995) to study the pattern of cross-country realwages over time. Here our concern is with real wages in Canada and the Nether-lands during the late 1920s. Table 1 compares the hourly wages of workers inCanada and the Netherlands in 1929.13 In the building trades, for example, thehourly wage of bricklayers and masons was $1.26 in Canada and 0.87f in theNetherlands. At this time, the exchange rate was 2.49f to $1 (Cdn), but convert-ing to a purchasing-power-parity index based on a consumption basket of foodand fuel gives a rate of 2.07 (see the appendix, table 1a, available on the CJE web-site). Thus, bricklayers and masons in Canada were receiving about three timestheir hourly wage in the Netherlands. In general, the wage of skilled workers inCanada was more than double the wage in the Netherlands. The premium wasmuch lower for unskilled labourers, about 50%, while on an annual basis farmworkers received 35% more in Canada.

These wage differentials are far greater than the financial migration costswould justify. Based on letters from immigrants, Herman Ganzevoort puts theminimum direct out-of-pocket cost at about 400 guilders. An immigrant writinghome in 1925 broke down the necessary expenses: ‘In order to emigrate, youshould have at least 410 guilders (f ). The ship costs 280f. All the companiescharge the same in third class from Rotterdam. The train in Canada costs about50f. You should also have 75f for landing money and your immediate expenses.’Another immigrant put the total cost at ‘about 400 guilders’ (Ganzevoort 1999,32–3, 100).14

Travel time was roughly two weeks, but there would have been in addition thetime to prepare for the voyage and begin employment.15 Allowing for six weeks oflost earnings, the cost to an unskilled labourer in the engineering trades, earning25f per week, was 150 guilders. The total cost of the move would therefore havebeen about 550 guilders. Had immigrants required only a normal return on theirmoving costs to induce them to migrate, the additional earnings, assuming a 4%discount rate, was 22 guilders or less than 2% of their annual earnings in theNetherlands (1,200 guilders). This compares to an actual wage differential ofmore than 50%. The discrepancy is even greater for skilled workers.

Capital market constraints may have accounted for part of the large wagegaps. As Ganzevoort argues, potential migrants faced the challenge of securingthe necessary capital: ‘However desirable it might seem to get away, there wereusually pressing problems for departure. For the most part these had to do withmoney, it being usually necessary to pay for all or part of the passage, to relieveobligations at home before leaving and to have some cash in pocket to start in

13 The years 1925–1928 give similar results.14 The fare of 280f , mentioned in the letter, is the same as the fare of $113 given in two 1925

Canadian Pacific Railway pamphlets (see notes to table 4).15 The ocean journey itself was six or seven days.


TABLE 1Hourly wages in Canada and the Netherlands, 1929

Canada Netherlands Canada / NetherlandsOccupation (dollars) (guilders) (PPP)a

BuildingBricklayers and masons 1.26 0.87 2.99Carpenters and joiners 0.94 0.84 2.31Plumbers 1.06 0.84 2.60Painters (general) 0.82 0.78 2.19Structural iron workers 0.95 0.82 2.40Concrete workersb 0.47 0.82 1.19Labourers (general)b 0.46 0.78 1.23

Mechanical engineeringFitters and turners 0.70 0.76 1.91Ironmoulders (sand) 0.71 0.72 2.02Patternmakers 0.78 0.72 2.22Unskilled labourers 0.45 0.59 1.58

Furniture makingCabinet makers 0.64 0.74 1.81Upholsterers 0.77 0.74 2.15French polishers 0.61 0.68 1.84

Printing and bookbindingHand compositors 0.84 0.67 2.61Machine compositors 0.84 0.77 2.27Machine minders 0.81 0.68 2.44Bookbinders 0.80 0.67 2.47

Electrical installation (buildings)Electrical fitters (skilled) 0.92 0.73 2.59

TransportTram and bus drivers 0.56 0.79 1.48Tram and bus conductors 0.56 0.74 1.59Motor drivers (van and lorry) 0.46 0.61 1.56Horse drivers (one horse) 0.42 0.59 1.47Railway goods porters 0.50 0.45 2.33Railway permanent way labourers 0.45 0.42 2.22

Local authoritiesUnskilled labourers 0.49 0.66 1.55

AgricultureFarm workersc 629 964 1.35

a The conversion is based on 2.07f = $1. See online appendix table 1a.b Concrete workers and general labourers in the Netherlands appear to have been skilled workers.c Annual earnings, including board (1927).SOURCES: ILR 20 (1929, 587, 869), ILR 18 (1928, 760–73), Canada, Department of Labour, LabourGazette, supplement (Jan. 1930, 100–1)

the new world. Money was usually hard for emigrants to come by and nearly allstruggled greatly with this problem before they could go’ (1975, 54).

Most immigrants also faced a low wage when they first arrived in Canada. Thevast majority became farm workers. In letters sent back home in 1925, Dutch


immigrants describe a range of initial farm wages. It was reported that some inManitoba received only board for the first three months and were paid just $16per month plus board after that, and even these wages might be withheld untilthe worker had remained on the farm for at least six months.16 In 1927 a husbandand wife on a farm in Saskatchewan were together receiving $35 per month plusboard, with board the equivalent of about $30. Another letter suggested ‘about$25 a month including room and board. If one can also speak the language, thiswill naturally change’ (Ganzevoort 1999, 38–9, 100, 128). It appears that after sixmonths, and sometimes sooner, many Dutch immigrants left their first employer,taking other farm work or work in the cities. An immigrant who remained on thefarm for a year receiving $25 per month and an additional $15 in board wouldbe receiving $480, which was about 20% below the annual earnings of unskilledlabourers in the Netherlands. Most skilled and white-collar workers from theNetherlands also began in Canada as farmhands. They faced a much greaterdecline in pay initially.

5. Simulating the migration decision

To illustrate how wages, capital constraints, tastes and other factors affectedthe migration decision, the model has been simulated using evidence related toDutch migration to Canada in the 1920s. In deriving the empirical results, aconstant-elasticity Stone-Geary utility function is assumed:

u(c) = (c − s)1−δ

1 − δ, (14)

where s can be interpreted as subsistence consumption and δ is the inverse ofthe intertemporal rate of time preference. Two cases are considered, correspond-ing to the decisions faced by unskilled and skilled migrants. Table 2 shows thesimulated time to migration, t0, and total saving, ST , for selected parameter val-ues and exogenous variables consistent with the experience of Dutch emigrants.An important component of the model is parameter, τ , which represents thepreference of potential migrants for the Netherlands. Clearly, there would havebeen a distribution of tastes. The value used in the simulations, τE , applies to themarginal migrant, whose lifetime utility is the same whether or not they emigrate.That is, τE is chosen so that equation (11) is satisfied with equality (see note totable 2).

Unskilled workers in the Netherlands earned about 1,200f per year, the pur-chasing power equivalent in Canada of about $600. Assuming an initial migration

16 The low wage and the withholding of wages may suggest that these immigrants were subject tothe kind of indenture that was reported to have existed prior to the war. Even informal indenturearrangements would have reflected a quid pro quo, as in the case where the employer paid theimmigrant’s passage. Informal indenture, however, did not appear to have been at play for Dutchimmigrants in the late 1920s; fewer than 1% reported that an employer had paid their fare.


TABLE 2Time to migration and savings of Dutch immigrants: simulation results

Comparative statics

Unskilled workers Skilled workers t0 ST τE

Utility parametersρ: % 2.0 2.0 ↑ ↑ ↓δ 2. 2. ↑ ↑ nas: guilders/yra 600. 600. ? ? na

Exogenous variableswH: guilders/yrb 1,200. 1,800.k 1.5 2.0 ↓ ↓ ↑wI: dollars/yrc 480. 480. ↓ ↓ ↑a: years 2. 2. ↑ ↑ ↓K : guildersd 550. 625. ↑ ↑ ↓r: %e 4.0 4.0 ↓ ↓ ↓

ResultsτE 0.75 0.46t0: years 4.5 5.4ST: guilders 745. 1,745.

dollars 299. 698.SC: guildersf 195. 1120.

dollars 78. 448.

NOTES: In the simulations the unskilled wage in the Netherlands (1,200f ) is normalized to 1 and$1 is treated as equivalent to 2f . Thus, s in the simulations is 0.5, and wI (unskilled) is 0.75. Onthe choice of utility function parameters see the discussion in Lewis (2001, 181). Lifetime (after age18), T , is put at 45 years, slightly lower than in Historical Statistics of Canada (1983, B67). Thesimulated results for t0 are derived by substituting the parameters and exogenous variables into thefirst-order condition for optimal migration time, where the equilibrium taste parameter, τE , is chosento equate the lifetime utility of the migrant and non-migrant (equation (11) satisfied with equality).The first-order condition for r = ρ is given by equations (12) and (13). The corresponding equationsfor r �= ρ are available from the authors. The simulation also gives optimal consumption from whichST is obtained (guilders here are converted to dollars at the official exchange rate of 2.5).

The comparative statics results are derived by marginally changing each of the utility parametersor exogenous variables and re-solving the first-order condition. An increase in τE implies a greatertaste for the Netherlands is needed for one to choose not to emigrate. Thus, variables that increaseτE make migration more likely. The comparative statics results for δ and s are not reported becausethey change the interpretation of τ .a One-half the annual earnings of unskilled workers. Per capita GDP in the Netherlands was about800f , and basic subsistence was perhaps 100f . National poverty lines have been found to approximatea geometrically weighted average, with weights of 2/3 on GDP per capita and 1/3 on minimumsubsistence. The implied poverty line was then 400 guilders. The equivalent for adult males shouldhave been higher. Basic subsistence is based on $1(US-1990 prices) per day. See von Bochove andHaitker (1987) and Kilpatrick (1993).b Based on a weekly wage of 24f for unskilled workers and 36f for skilled workers (ILR 16, 1927,862).c See discussion of agricultural wages in the text.d Cost of the fare and travelling expenses plus six weeks lost earnings (see text).e From 1925 to 1929 the bank rate in the Netherlands was about 4%, somewhat lower in 1926 andhigher from 1927 to 1929 (van Zanden 1997, 147).f SC is the difference between total savings, ST , and K , the cost of migration. To the extent that part ofthe cash holdings of immigrants on arrival covered the direct cost of migration, SC would understatecash on arrival.


cost of 550 guilders, two years of relatively low earnings after migration ($480 peryear), and an ultimate increase in annual earnings 50% over the Dutch level, opti-mal migration time is 4.5 years and total saving is 745 guilders ($299). Note that,if emigrants could borrow to cover the cost of the move and had no preference forthe home country, the required increase in wage would be just 2.5%.17 The tasteparameter, τE , of 0.75 implies that Dutch workers must consume roughly 30%more in Canada to regard themselves as equally well off.18 The balance of the50% wage differential was due almost entirely to the capital constraint. The wagedifferential for skilled workers was much greater – workers in Canada earnedabout twice those in the Netherlands. The simulated optimal migration time forskilled workers is 5.4 years, which is somewhat longer than for unskilled workers,and savings are considerably greater: 1,745 guilders ($698). The greater savingand longer time to migration are due to the larger gap between the Dutch skilledwage and the initial wage of immigrants, who mostly started as farm workers.For a taste parameter, τE , of 0.46, skilled workers have the same lifetime utility ifthey migrate to Canada. Certainly, preference for the Netherlands discouragedworkers from emigrating; but the implied consumption differential of 57% is farless than the wage gap, which was 100%.19

The effect of each parameter and exogenous variable is derived by re-simulating the model for small changes, where the focus is on time to migration,t0, savings at migration, ST , and the equilibrium taste parameter, τE . An increasein the pure rate of time preference, ρ, increases migration time, since the migrantwill choose to consume more in early periods. Total saving, ST , also increasesbecause the gap between consumption and the initial wage after migration will begreater (see figure 2). The equilibrium taste parameter, τE , declines, meaning thatthose at the margin will have less preference for the Netherlands. The implicationis that a higher pure rate of time preference discourages migration. A highervalue of δ (lower intertemporal rate of time preference) also increases savingsand time to migration, since migrants will choose to smooth consumption more.

17 A 4% discount rate is assumed (see notes to table 2). Choosing a higher rate would not affect thepoint that the wage differential was orders-of-magnitude greater than perfect capital marketswould imply.

18 We can express the taste parameter in terms of the (annual) consumption in Canada that wouldbe equivalent to the consumption of a worker in the Netherlands. Assuming r = ρ (constantconsumption) and noting that, with the normalization to the Dutch unskilled wage, s = 0.5 andwH = 1, the equivalent wage in Canada, wC

E , can be derived from the utility function (equation(14)):

(wE

C − .5)1−δ

1 − δ= τ + (wH − .5)1−δ

1 − δ

For δ = 2 and τ = 0.75, wCE is 1.3. Thus, at equilibrium, about 30 percentage points of the 50%

wage differential can be attributed to tastes.19 Following the approach of fn18, where δ = 2, τ = 0.46, and wH = 1.5, it follows that wC

E is 2.35,or 57% above the Netherlands skilled wage. This compares to an actual differential of 100%.


TABLE 3Equilibrium wage and time to migration: sensitivity of the results

Unskilledworkers Skilled workers

Base casea Alternativea wageeq t0eq wageeq t0

eq

Base case 1.50 4.5 3.00 5.4Utility parameters

ρ: % 2.0 3.0 1.52 6.3 3.10 7.2δb 2.0 3.0 1.80 8.5 6.40 10.1sb: guilders/yr 600 300 1.45 2.8 2.91 4.3

Exogenous variableswI : dollars/yr 480 530 1.47 3.4 2.97 4.8a: years 2 3 1.59 4.9 3.50 6.7K : guilders 550, 625c 625, 750c 1.53 5.2 3.06 5.7r: % 4.0 5.0 1.54 3.9 3.13 4.8

NOTES: Results are derived as in table 2, where the same equilibrium taste parameter, τE , is assumed.The wage is normalized to the annual unskilled wage in the Netherlands (1,200 guilders).a The base case is drawn from table 2. The alternative is the base case with one of the variableschanged.b The taste parameter is adjusted so that the relative value of consumption in Canada and theNetherlands is not affected.c The first value applies to unskilled workers and the second to skilled workers.

A higher value of δ also discourages migration.20 The effect of an increase in theassumed subsistence level, s, depends on the home wage. For low-wage migrants,an increase in s raises the time to migration; but high-wage migrants migratesooner because, with s higher, the relative increase in consumption net of subsis-tence is greater and it is this effect that dominates. The exogenous variables havethe expected effects. An increase in the initial wage after migration, wI , reducessavings and migration time, since the gap between consumption and wages inthe initial period is less. An increase in the time period when wages are low, a,has the opposite effects, as does an increase in the direct cost of migration, K .A higher wage premium, k, shortens the time to migration. Notable is the effectof the discount rate. Because migrants are accumulating for a future move, anincrease in the discount rate reduces the present value of the required saving andthus lowers the age at migration.

To give a sense of the magnitude of the effects, table 3 shows the equilibriumwage in Canada and the corresponding optimal migration time for a change ineach of the parameters or exogenous variables, holding tastes constant at thelevels derived in table 2. First, we turn to the exogenous variables. Increasing theannual initial Canadian wage, wI , by $50 reduces the adjustment cost and thus

20 Following fn18, an increase in δ requires an offsetting increase in τ if the relative value ofconsumption in the two regions is to stay the same. When the adjustment is included, highervalues of δ imply a lower equilibrium taste differential.


lowers the wage ultimately required in Canada. The decline is about $20 per year.Note that if one were to amortize the $100 of additional income (the adjustmentperiod is two years) at 4% the implied effect would be just $5 per year. As well,time to migration falls by more than one year for unskilled workers, reflectingthe need for less savings. An increase in the adjustment period, a, to three yearsimplies a much larger adjustment cost, especially for the skilled workers. Theirrequired wage increases by 17% and time to migration increases by 1.3 years.21 Anincrease in the direct migration cost, K , by $50 has effects similar in magnitudeto the increase in wI , but they are in the opposite direction. Finally an increasein the discount rate, r, to 5% raises the required wage slightly and lowers the ageat migration by about seven months.

The utility parameters have markedly different effects on the migration deci-sion. An increase in the pure rate of time preference, ρ, from 2% to 3%, has littleeffect on the required wage in Canada, but the time to migration is markedlyincreased, by 1.8 years, pointing to the importance of how willing emigrants areto postpone consumption. But even more significant is the intertemporal rate oftime preference, especially for skilled workers. A value, δ, of 3.0 rather than 2.0leads to a doubling of the required wage in Canada. Interpreting δ as relativerisk aversion, an implication of these results is that those who are relatively riskloving will be the ones who tend to migrate, and that will be especially true if theirwage in the home country is already quite high. Finally, reducing the subsistenceparameter, s, from 600 to 300 guilders has a larger impact on unskilled workersin terms of reducing their time to migration.

6. Analysing Dutch immigration from the passenger lists

We now turn to data drawn from the passenger lists of ships that arrived atCanadian ports during the years 1925 to 1929. We have observations on 2,976adult male arrivals and their families who were identified as being of ‘Dutch,’‘Holland,’ or ‘Netherlands’ nationality. The passenger lists include informationon age, occupation in the Netherlands, intended occupation, intended destinationin Canada, name of and relationship to a contact person in Canada, whether theypaid their own passage, and their cash holdings on arrival. Wives and childrenaccompanying the male household heads are also identified.

Quebec City, Halifax, and Saint John (New Brunswick) were the main portsof entry. The vast majority of immigrants arrived in March, April, and May,in time for the agricultural season. As with any data gathered through self-reporting, the information on the passenger lists should be viewed with caution.

21 An implication is that high unemployment in the destination country will have a large impact onimmigration even if it is expected to be temporary, since those who had been planning tomigrate will now delay. On the other hand, high unemployment in the home country maymarkedly induce emigrants to advance that decision. Such large effects would not obtain ifcapital markets were perfect.


As we noted, Canadian immigration rules specified that, with few exceptions,only those planning to enter agriculture would be admitted. Dutch newcomershad a possible incentive to exaggerate their farm experience and intention topursue agricultural work. There is, moreover, the possibility that immigrantsmisrepresented their true destination; indeed, some immigrants may have beenlooking for a back door to the United States. These cases, however, appear tohave been rare; the evidence collected by Ganzevoort (1988, 1999) indicates thatimmigrants who claimed to be moving to Canadian farms did so, at least initially.

From the passenger list data, we obtain variables related to the migration deci-sion. The savings variable is derived by adding the cost of the ocean journey, if thepassage was paid for by the immigrant, to cash on arrival. The cost to an adulttravelling third class from Rotterdam to Quebec in the mid-1920s was $113.22

We add another $113 if the immigrant came with his wife and $56 for each childunder 18 years of age. The immigrant’s occupation in the Netherlands is assignedto one of four wage classes. Those who were farmers or other agricultural workersin the Netherlands are in the low-wage class, with the exception of those farmerswho arrived with more than $500 cash. We assume these immigrants were in-tending to purchase farms and we include them in the high-wage class. Unskilledworkers are placed in the medium low-wage class, and skilled workers in themedium high-wage class.23 The immigrant’s contact in Canada is categorized asemployer, family, friend, or agency. The agency category includes railroad agentsand representatives of either the Canadian government or a Dutch immigrationagency.

A summary of the statistics disaggregated by wage class and contact is pre-sented in table 4. Median age at migration was 25.0, with both median andaverage age increasing with wage class. Average total saving and average cash onhand also increased with wage class, except that those in the medium high-wagecategory had slightly lower cash holdings than the medium low-wage workers.Most immigrants had been farm workers, and these are placed in the low-wagecategory. Over 90% of immigrants indicated that they intended to work in agri-culture, including the vast majority of medium high- and high-wage workers.Although Canadian immigration agents’ preference for farm workers possiblyinfluenced occupational choices, farm work, with its lower reliance on Englishlanguage skills, may have been an ideal first job.

Table 4 also gives a breakdown by the immigrant’s contact in Canada. Thosewhose contacts were family members were slightly older and had accumulated

22 This is the fare reported in two 1925 Canadian Pacific Railway pamphlets (see notes to table 4).Letters of Dutch emigrants reported a similar cost (Ganzevoort 1999, 100).

23 The assignment of occupations to wage classes is based on weekly wages reported in the LabourGazette (Canada) in the period 1925 to 1929. See the online appendix, table 2a. Ideally theassignment would be based on wages in the Netherlands, but we have less occupational data forthat country. The Canadian data, however, are a good substitute. A comparison of hourly wagesacross 24 occupations shows a close relationship (see table 1). Excluding concrete workers andlabourers in the building trades, who were defined differently, the simple correlation between thetwo series is 0.75.


TABLE 4Characteristics of Dutch immigrants to Canada, 1925–1929

Wage class Contact in Canada

Total High Med high Med low Low Employer Family Friend Agency

AgeMean 27.4 32.5 28.9 27.0 26.7 27.8 28.8 27.4 26.8Median 25.0 31.0 26.0 24.0 24.0 25.0 25.0 25.0 25.0Std. dev. 7.9 9.6 8.9 7.5 7.4 7.9 10.1 7.7 7.2

Cash on arrival 163.9 787.9 207.5 167.4 94.6 136.8 227.4 201.6 136.2(dollars)

Savings (dollars) 330.8 1033.2 365.3 309.9 257.4 292.5 410.0 372.1 299.3Accomp’d by 16.8 38.7 17.1 11.6 15.0 18.1 27.7 17.5 12.9

wife (%)Accomp’d by 12.1 28.4 11.4 8.9 10.8 12.6 21.6 10.9 9.5

children (%)

Intended occupationAgriculture 91.9 74.2 60.5 76.0 99.6 81.0 87.3 86.3 97.5Non-Agriculture 8.1 25.8 39.5 24.0 0.4 19.0 12.7 13.7 2.5

ContactEmployer 10.4 8.9 13.0 10.2 10.2Family 16.4 16.0 24.1 19.1 15.1Friend 19.4 24.4 23.7 23.1 17.9Agency 53.9 50.7 39.1 47.6 56.8

Wage classHigh 7.6 6.5 7.4 9.5 7.1Medium high 10.0 12.6 14.8 12.3 7.3Medium low 7.6 7.4 8.8 9.0 6.7Low 74.8 73.5 69.0 69.1 78.9

Total 100.0 7.6 10.0 7.6 74.8 10.4 16.4 19.4 53.9

NOTES: Based on 2,976 immigrants (household heads). For definitions of the contact variables seethe text. The wage classes are based on the occupational groupings given in the online appendix,table 2a. Savings is constructed by adding the immigrant’s cash holdings to the total voyage fare (in-cluding that of family members) if the immigrant paid for the ticket himself. Fares are taken from thepamphlets Canadian Pacific: To and From Europe Third Class Fares, published 8 June 1925, and Cana-dian Pacific Sailings To and From Europe, published 17 April 1925. Both pamphlets were provided bythe archives of the Canadian Pacific Railway Company. The fares in Canadian dollars were as follows:

Steamship Train (East) Train (West)

Third Cabin First Third Cabin First Third Cabin FirstAdult 113 153 236 10 14 22 20 28 45Child 56 76 118 5 7 11 10 14 22

SOURCE: Canada, Library and Archives, Passenger Lists, 1865–1935

more savings than immigrants whose contact was an employer or agency. Theaverage saving of family-contact immigrants was $410, which was about $100more than those who had been assisted by an agency or whose contact was anemployer. The difference was due in part to the greater tendency of immigrants


with a family contact to be travelling with dependants, whose ocean fare hadto be covered. Of these immigrants, 28% came with dependants compared with18% of immigrants who were meeting an employer and 13% whose contact wasan agency. But as we show, the differential presence of dependants is just part ofthe reason family-contact immigrants had greater savings.

Savings and age at migration are analysed with regressions where the ex-planatory variables include wage class, contact in Canada, accompanying familymembers, and other factors related to the migration decision. In the first regres-sion (table 5, I) savings is restricted to cash holdings on arrival. Accompanyingfamily members raised cash savings by $50 for a wife and $27 for each child.Those who travelled cabin or first class apparently wished to maintain a higherlevel of consumption once they arrived in Canada. Even after adjusting for otherfactors, they brought more cash, $122. Compared with the low-wage group, beingin the medium high-wage category raised cash savings by $42, and being in thehigh-wage category by $234. Higher-wage workers had greater consumption inthe Netherlands, and to maintain that consumption after first arriving in Canadathey would have had to arrive with more savings. It should be acknowledged,however, that the greater saving of these groups may have been due in part toconventional lifetime accumulation unrelated to the migration decision. The co-efficients on contact in Canada reflect the likelihood that those with a familymember or friend as contact took longer to find employment than those whowere meeting an employer or were being assisted by an agency. The absence ofimmediate employment would have increased the shortfall between desired con-sumption and wage after arrival. The coefficients on family and friend are both$54 and significant. Also suggestive of the role of the initial wage is the lowersavings of those who arrived in the spring, when the demand for farm labourwas greater. The dependent variable in the second regression, savings (table 5,II), is cash on arrival plus an estimate of travel costs to Canada. The intercept isgreater, of course, $158 versus $37, and the coefficients on accompanying familymembers are also greater, reflecting their fares, but otherwise the regression givessimilar results.

Age at migration was affected by a variety of factors, one of which was thetime needed to accumulate the funds to finance the move. The first regressionbased on age (table 5, III) has an intercept of 27.1 years, which is older thanthe 22 to 24 years of age that the simulations in table 2 would suggest, theimplication being that age at migration was based on more than the time neededto accumulate savings.24 The theoretical model does not suggest a clear relationbetween time to migration and wage class. Those with higher wages saved a givensum in a shorter period; but because the shortfall between consumption and theinitial wage after arrival was greater, they saved more. Further complicating the

24 Time to migration of unskilled workers, t0, is 4.5 years, giving an implied age at migration of22.5 to 24.5 depending on whether age 18 or 20 is treated as the initial year. Although theintercept of the age regression, 27.1 (table 5, III), is 2.6 to 4.6 years higher, median age atmigration of medium low-wage workers, 24.0, is much closer (see table 4).


TABLE 5Explaining the savings and ages of Dutch immigrants to Canada, 1925–1929

Cash Savings Age AgeI II III IV

Savings 0.003∗∗∗

(0.0004)Travelling with wife 50.40∗∗∗ 173.15∗∗∗ 3.94∗∗∗ 3.39∗∗∗

(19.07) (19.39) (0.43) (0.43)Number of children 26.82∗∗∗ 95.47∗∗∗ 1.86∗∗∗ 1.55∗∗∗

(6.41) (6.52) (0.14) (0.15)Cabin or first class 122.15∗∗∗ 182.12∗∗∗ −0.85∗ −1.43∗∗∗

(22.53) (22.90) (0.51) (0.51)Wage class

Medium low 17.44 7.43 0.27 0.24(22.06) (22.42) (0.50) (0.49)

Medium high 41.53∗∗ 36.38∗ 1.72∗∗∗ 1.61∗∗∗

(19.61) (19.94) (0.44) (0.44)High 233.66∗∗∗ 234.03∗∗∗ 2.11∗∗∗ 1.36∗∗∗

(24.71) (25.12) (0.56) (0.56)Contact

Employer 32.13 24.12 0.001 −0.08(20.82) (21.16) (0.47) (0.46)

Family 53.46∗∗∗ 37.09∗∗ 0.31 0.19(17.52) (17.80) (0.39) (0.39)

Friend 53.82∗∗∗ 53.42∗∗∗ −0.006 −0.17(16.25) (16.52) (0.37) (0.36)

Can read English 19.25 14.42 −0.02 −0.07(14.95) (15.19) (0.34) (0.33)

Rich farmer 996.84∗∗∗ 1017.21∗∗∗ 4.43∗∗∗ 1.21(28.88) (29.35) (0.65) (0.76)

Arrived in spring −24.58∗ −26.10∗ −1.12∗∗∗ −1.03∗∗∗

(13.23) (13.45) (0.30) (0.29)Passage paid by employer −68.06 −224.80∗∗∗ 2.70∗ 3.41∗∗

(66.31) (67.40) (1.49) (1.48)Controls

Intended destination (province) Yes Yes Yes YesYear of arrival Yes Yes Yes Yes

Intercept 37.34 158.32∗∗∗ 27.14∗∗∗ 26.63∗∗∗

(22.85) (23.23) (0.51) (0.51)Observations 2976 2976 2976 2976Adjusted R2 0.48 0.58 0.25 0.27

NOTES: ∗∗∗ (∗∗) [∗] indicates significantly different from zero at 1%, (5%), and [10%]. Standard errorsare in parentheses. Cabin or first class: the benchmark is third class. The distribution was third class,92.7%; cabin class, 7.1%; first class, 0.2%. Wage class: the benchmark is the low-wage group. See notesto table 4 and text. Contact: the benchmark is an agency contact. These include Dutch and Canadianimmigration agencies as well as agents of the CPR and CNR. Can read English: 20% indicated thatthey could read English. All immigrants claimed to read Dutch. Rich farmer: immigrants intendingto go into agricultural and carrying at least $500 in cash. They are presumed to be purchasing farmsrather than working as farm labourers. This group composed 5.6% of the entire sample. Arrived inspring: March, April, or May (74% of the sample).SOURCE: Canada, Library and Archives, Passenger Lists, 1865–1935


comparison is evidence that the wage in Canada relative to the Netherlands wasgreater for higher-wage workers.25 The simulations in table 2 imply that skilledimmigrants would be older than unskilled, and the coefficients on wage class areconsistent with that result; they are positive and significant for both the mediumhigh- and high-wage groups. Although an implication of the model is that thelack of immediate employment would delay migration because of the need formore savings, none of the contact variables is significant. The coefficients onwage class in the age regression imply that those with higher wages would tend tomigrate later. The coefficient is 1.7 years for the medium high-wage group, and2.4 years for the high-wage group. Both are significant and pairwise significantlydifferent from the medium-low coefficient and from each other, all at the 2%level. It should be recognized, though, that these differences could be due in partto factors other than the migration decision. For example, those in the higherwage categories may have spent more time accumulating human capital. By the1920s, however, this training would have been received on the job rather thanthrough apprenticeship or formal vocational training programs.26

According to the life-cycle model with a capital constraint, migration is de-layed by the need to accumulate savings. To help isolate this effect on the timingof migration, we introduce savings into the age regression (table 5, IV).27 Com-paring the coefficients of the age regressions with and without savings suggeststhe extent to which migration was delayed by a capital constraint and how muchby other factors. Being in the medium high-wage group increases age at migrationby 1.72 years in comparison with low-wage workers (table 5, III). When savingsare included in the regression, the gap is less, 1.61 years, but the difference issmall. It is much greater for high-wage workers, 2.11 versus 1.36. Thus, onemight interpret the older ages of high-wage workers as having been due in partto the greater amount they saved to finance migration. The impact of includingsavings in the regression on age is also evident in some of the other estimates.The coefficient on those travelling cabin or first class is −1.43 rather than −0.85,suggesting that the additional savings of this group raised age at migration, whilehaving the passage paid by an employer lowered migration age.28

25 An increase in relative wage, k, lowers age at migration.26 It should be noted, however, that in terms of explaining migration time, the accumulation of

human capital through apprenticeship or other forms of training may not have been a majorfactor. By the 1920s, apprenticeship in the Netherlands was rare. Technical crafts and tradeswere taught in full-day vocational schools (ambachtsscholen). The courses typically lasted threeyears and would commence following completion of mandatory primary education at age 12.The courses were completed before age 18 (Reinisch and Frommberger 2004, 28).

27 Because age at migration and savings are jointly determined, there is the potential problem ofbias. It should be pointed out that in the model the causality from age to savings is weak. A laterage at migration increases savings only to the extent that it raises consumption in the yearsimmediately after migration, because it allows for greater consumption earlier (see figure 2). Thesimulations imply a very small effect.

28 The coefficient on passage paid by employer increases from 2.70 to 3.41. It should beacknowledged that ours is not the only interpretation of the impact of savings on age atmigration. To the extent that some of the savings of these immigrants were a result of life-cycle


The estimates of table 5 generally support the notions that a capital constraintaffected how much emigrants saved to finance, not just the actual trip, but alsotheir adjustment costs after they arrived in Canada, and that these savings af-fected the timing of migration. We do not claim that a migration model with acapital constraint fully, or even mainly, accounts for the characteristics of theDutch immigrants who came to Canada from 1925 to 1929. Canada’s desirefor farm labour clearly had a big impact on the occupational distribution ofthe workers, and although the capital constraint model predicts a delay in mi-gration, the immigrants were several years older than can be accounted for bysavings alone. Other factors, such as changing conditions in the Netherlands andCanada, likely played a role as well. Still, the simulation results and the coef-ficient estimates, especially on wage class and, to a lesser degree, on contact inCanada, are evidence that taking a life-cycle perspective on emigration in a waythat recognizes the limited potential for borrowing yields important insights.

7. Conclusions

The observation that a borrowing constraint affected the migration decision fol-lows in the tradition of Galenson, Grubb, Hatton and Williamson, and otherswho have explored population movements from the Old to the New World. Ouranalysis, which formalizes the view that obtaining the funds to emigrate was a se-rious hurdle, leads to a range of implications about the timing of migration as wellas the decision to migrate itself. These implications are developed and illustratedin light of the late-1920s experience of Dutch immigrants to Canada. A wage gapbetween Canada and the Netherlands of 50% for unskilled workers and 100% forskilled workers belies an explanation of migration that relies on transportationand adjustment costs alone. The simulations results reported in table 2 suggestthat disruptions to earnings that could not be dealt with by borrowing as well as apreference for the Netherlands by those who still chose to migrate jointly providea way of interpreting important aspects of the migration decision. The evidencefrom the passenger lists, while in some respects supportive of this approach tomigration, highlight the variety of factors that were involved.

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international migration with capital constraints: interpreting migration from the netherlands to...

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