Homework 5

Title: Immigration Consulting Case

This is a global world, even you are born in A country, it is possible to immigrate to B
country. The reasons why people want to immigrate are like pursuing better living
environment, getting useful passports, asking for higher incomes, or receiving better
welfare system, etc. We want to use cases in China, because there are many Chinese
immigrate to other countries.
Around 1,300,000,000 population in China, also as a biggest talented people
exporting country, some rich or capable Chinese try to search which country they should
move, on the other hand, Chinese government also worries about the loss of talent.

Fig. 1 Immigration

Fig. 2 Attractive Destination for Immigrants

In a study published in 2010 1), France's Demographic Studies Institute (Ined) lists
countries that have the largest number of migrants, and also where the millions of
migrants come from. The results show that US is still the world's leading destination for
immigrants in Fig. 2. In 2014, Germany has risen to become the world’s number 2

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destination for permanent migration after US, overtaking the U.K. and Canada,
according to a survey by the Organization for Economic Cooperation and Development
(OECD) 2).

1.1 Purpose
A) To understand how Chinese people determine which country to immigrate.
B) To give suggestions for Chinese government knowing what to improve compared to
other countries.

1.2 Importance
Nowadays every countries are struggling for attracting talented people to come to
their countries. By doing so, the country could maintain high quality productivity and
increase potentials of investment. Consequently it is necessary to know the criteria of
their selecting immigrating countries to promote international competitiveness.
Several immigration consulting companies in China provide various service for
customers. They provide the information and limitation of each target countries, and
help people make decisions. As a result, I want to discuss this social phenomenon to my
study and discover deeply. Moreover, the results are representative for Chinese
government to improve domestic affairs.

2.1 Choice Alternatives and Model Structure

Here nest logit model (NL) or cross nest logit model (CNL) are created to show choice
alternatives. Form 1 shows 11 popular immigration destination countries for Chinese
citizen.
Form 1 Popular Immigration Destination
US USA AU Australia
CA Canada NZ New Zealand
GE Germany SG Singapore
UK England HK Hong Kong
SE Sweden DM Dominica
ZA South Africa

2 kinds of classification to separate alternatives are supposed: location and official

language. It is undoubted that there are other ways to create nests like
developing/developed countries. Here I only give examples in location and language,
and then we have to test IIA and decide which is more suitable for this problem solving.

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A) Location-based
5 nests are defined: America, Europe, Oceania, Asia and Other Country. South Africa
is in Africa, Dominica is in Caribbean Sea, so both of them are classified to “Others”
nest in Form 2. Nest logit model (NL) structure is drawn as Fig. 3.

Form 2 Location-based Nests

Nest Alternative
America AME US, CA
Europe EUR GE, UK, SE
Oceania OCN AU, NZ
Asia ASI SG, HK
Other Country OTH DM, ZA

AME EUR OCN ASI OTH

US CA GE UK SE AU NZ SG HK DM ZA

Fig. 3 Nest Logit Model (location-based)

B) Language-based
If the official language is Chinese or English, it would be easier for Chinese citizen to
live in. They have to additionally learn German and Swedish if they select Germany and
Sweden. According to official language in destination countries, 3 nests are defined:
English, Chinese, and Other Languages. However, it is acceptable to speak Chinese
and English in Singapore as Form 3, so SG is a special case that we should use cross
nest logit model (CNL) to describe the structure as Fig. 4.

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 Form 3 Language-based Nests
Nest Alternative
US, CA, UK, AU, NZ,
English ENG
DM, ZA, SG*
Chinese CHI HK, SG*
Other
OLG GE, SE
Language

ENG CHI OLG

US CA UK AU NZ DM ZA SG HK GE SE

Fig. 4 Cross Nest Logit Model (language-based)

C) Simplified Problem
Because too many alternatives in one structure, we simplify the problems as Fig. 5.

ENG CHI OLG

AME EUR OCN ASI

US CA GE AU SG HK US CA AU SG HK GE

Fig. 5 Simplified Problem

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2.2 Variables
A) Nest Variables
Variables Variables Descriptions
AME America If destination is in America
EUR Europe If destination is in Europe
OCN Oceania If destination is in Oceania
ASI Asia If destination is in Asia
ENG English If destination uses English
CHI Chinese If destination uses Chinese
OLG Other Language If destination uses other language

B) Alternative Variables
Variables Variables Descriptions
High education promotion rate means
LEVEDU Level of education
better education system. (+)
SAFETY Public safety Low crime rates attract more people. (-)
GDP Gross Domestic Product GDP is higher that people are richer. (+)
High average income level make life
AVEINC Average income level
comfortable. (+)
PRICEX Price index High price index is a burden for life. (-)
Years of Residency Long years of residency obligations
PERIOD
Obligations restrict immigration desires. (-)
FEE Immigration Fees High costs is a negative factor. (-)
Nice weather should maintain 10~20
TEMPERATURE Average Temperature
degrees. Higher or lower is not good. (+/-)

C) Personal Data
Variables Variables Descriptions
INCOME Annual income If the person is rich, he will have more
alternatives. (+)
AGE Age Age depends. (+/-)
SEX Gender Age depends. (+/-)
EDUCATION Education High educated people tend to immigrate. (+)
MEMBER Family Member More family members is difficult to move. (-)

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2.3 Utility Function
VUS = ASCUS + βLEVEDU_US * LEVEDU_US + βINCOME * INCOME
+ βSAFETY_US * SAFETY_US + βAGE * AGE
+ βGDP_US * GDP_US + βSEX * SEX
+ βAVEINC_US * AVEINC_US + βEDUCATION * EDUCATION
+ βPRICEX_US * PRICEX_US
+ βPERIOD_US * PERIOD_US
+ βFEE_US * FEE_US
+ βTEMPERATURE_US * TEMPERATURE_US

VCA = ASCCA + βLEVEDU_CA * LEVEDU_CA + βINCOME * INCOME

+ βSAFETY_CA * SAFETY_CA + βAGE * AGE
+ βGDP_CA * GDP_CA + βSEX * SEX
+ βAVEINC_CA * AVEINC_CA + βEDUCATION * EDUCATION
+ βPRICEX_CA * PRICEX_CA
+ βPERIOD_CA * PERIOD_CA
+ βFEE_CA * FEE_CA
+ βTEMPERATURE_CA * TEMPERATURE_CA

VGE = ASCGE + βLEVEDU_GE * LEVEDU_GE + βINCOME * INCOME

+ βSAFETY_GE * SAFETY_GE + βAGE * AGE
+ βGDP_GE * GDP_GE + βSEX * SEX
+ βAVEINC_GE * AVEINC_GE + βEDUCATION * EDUCATION
+ βPRICEX_GE * PRICEX_GE
+ βPERIOD_GE * PERIOD_GE
+ βFEE_GE * FEE_GE
+ βTEMPERATURE_GE * TEMPERATURE_GE

VAU = ASCAU + βLEVEDU_AU * LEVEDU_AU + βINCOME * INCOME

+ βSAFETY_AU * SAFETY_AU + βAGE * AGE
+ βGDP_AU * GDP_AU + βSEX * SEX
+ βAVEINC_AU * AVEINC_AU + βEDUCATION * EDUCATION
+ βPRICEX_AU * PRICEX_AU
+ βPERIOD_AU * PERIOD_AU
+ βFEE_AU * FEE_AU
+ βTEMPERATURE_AU * TEMPERATURE_AU

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VHK = ASCHK + βLEVEDU_HK * LEVEDU_HK + βINCOME * INCOME
+ βSAFETY_HK * SAFETY_HK + βAGE * AGE
+ βGDP_HK * GDP_HK + βSEX * SEX
+ βAVEINC_HK * AVEINC_HK + βEDUCATION * EDUCATION
+ βPRICEX_HK * PRICEX_HK
+ βPERIOD_HK * PERIOD_HK
+ βFEE_HK * FEE_HK
+ βTEMPERATURE_HK * TEMPERATURE_HK

VSG = ASCSG + βLEVEDU_SG * LEVEDU_SG

+ βSAFETY_SG * SAFETY_SG
+ βGDP_SG * GDP_SG
+ βAVEINC_SG * AVEINC_SG
+ βPRICEX_SG * PRICEX_SG
+ βPERIOD_SG * PERIOD_SG
+ βFEE_SG * FEE_SG
+ βTEMPERATURE_SG * TEMPERATURE_SG

A) Location-based
Nest logit model’s µ are as follows: µAME, µEUR, µOCN, µASI, µOTH, other µ=1

B) Language-based
Cross Nest logit model’s 3 µ are as follows: µENG, µCHI, µOLG, µCHI_SG, µENG_SG, other µ=1,
and µCHI_SG + µENG_SG =1

2.4 Error Component

A) Location-based (NL)
VUS = ... + ηAME
VCA = ... + ηAME
VSG = ... + ηASI
VHK = ... + ηASI
Where ηAME ~ N(0, σAME2), ηASI ~ N(0, σASI2)

B) Language-based (CNL)
VUS = ... + ηENG
VCA = ... + ηENG

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VAU = ... + ηENG
VSG = ... + ηCHI + ηENG
VHK = ... + ηCHI
VGE = ... + ηOLG
Where ηENG ~ N(0, σENG2), ηCHI ~ N(0, σCHI2), and ηOLG ~ N(0, σOLG2)

3.1 Data Collection

Data resources could be several ways
A) Official data from government homepage
Alternative Variables (LEVEDU, SAFETY, GDP, AVEINC, PRICEX, PERIOD, FEE,
TEMPERATURE)

B) Questionnaire
Respondent’s choice should be get by stated preference (SP) data. By doing so we
can collect Personal Data (INCOME, AGE, SEX, EDUCATION, MEMBER) and their
choice (US, CA, GE, AU, SG, HK).

4.1 Snapshot of policy analysis with the identified discrete choice model
From the results we get from the model, we can get a weight of each variable and
also rank them as Form 4 and understand where to improve for Chinese government.
For example, if the results show people emphasize on level of education and public
safety, which are key points of discouraging them to stay in China, so the government
has to focus on this issue to propose some countermeasures.

Form 4 Rank of Decisive Factors (example)

1 LEVEDU Level of education
2 SAFETY Public safety
3 FEE Immigration Fees
4 PRICEX Price index
5 GDP Gross Domestic Product
6 AVEINC Average income level
7 TEMPERATURE Average Temperature
Years of Residency
8 PERIOD
Obligations

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 We can also simulate the percentage of immigration destination countries if one
country change their immigration policy. For example, if Canada change immigration
policy (make years of residency obligations 2 years longer), it would discourage people
from moving to there as Form 5.

Form 5 Simulation of Immigration Destination (example)

Before After
US 30% 33%
CA 15% 10%
GE 5% 4%
AU 10% 12%
HK 20% 20%
SG 20% 21%

5.1 Limitation of the Analysis

Actually factors of selecting immigration destination are not just as what I listed. It
covers wide fields including environment, human, politics, economy, culture,
government etc. Moreover, immigration requirement for different countries are also
different, and sometimes it is difficult to compare at the same time.
Here I list some factors that could also affect their choices, but I skip them in my
discrete choice model because of it complexity.
A)more and more alternatives rather than only 6 countries
B)diverse chances: investment immigrant, technology immigrant, spouse immigrant, etc
C)other possible factors: percentage of Chinese immigrant, recognition of double
nationality, Jus soli, and so on.
Discrete model could only provide a rough estimation but it is useful for policy making.

6.1 References
1. Brigitte Perucca, “US is still the world's leading destination for immigrants”, Guardian
Weekly, December 14, 2010. Retrieved on August 6, 2014 at
http://www.theguardian.com/world/2010/dec/14/united-states-immigration-numbers-
perucca#zoomed-picture
2. Alex Webb, “Germany Top Migration Land After U.S. in New OECD Ranking”,
Bloomberg, May 21, 2014. Retrieved on August 6, 2014 at
http://www.bloomberg.com/news/2014-05-20/immigration-boom-propels-germany-p
ast-u-k-in-new-oecd-ranking.html