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How Borrowing Constraints Hinder Migration: Theoretical Insights from a Random Utility Maximization Model

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  • Léa Marchal
  • Claire Naiditch

Abstract

We provide a theoretical framework to analyze how financial constraints hinder migration. Introducing wealth heterogeneity and borrowing constraints into a random utility maximization model of migration, we find evidence of multilateral resistance to migration stemming from borrowing constraints. We calibrate the model on 22 European countries, and we show that omitting the constraints biases upward the estimation of bilateral migration rates. We then simulate an increase in the bilateral cost of migration to the United Kingdom. We find that omitting the constraints biases downward the change entailed by the cost increase in the bilateral rates of migration to all destinations.

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  • Léa Marchal & Claire Naiditch, 2020. "How Borrowing Constraints Hinder Migration: Theoretical Insights from a Random Utility Maximization Model," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(2), pages 732-761, April.
    • Handle: RePEc:bla:scandj:v:122:y:2020:i:2:p:732-761
    DOI: 10.1111/sjoe.12355
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    2. Bertoli, Simone & Moraga, Jesús Fernández-Huertas & Guichard, Lucas, 2020. "Rational inattention and migration decisions," Journal of International Economics, Elsevier, vol. 126(C).
    3. Lars Ludolph & Barbora Šedová, 2021. "Global food prices, local weather and migration in Sub-Saharan Africa," CEPA Discussion Papers 26, Center for Economic Policy Analysis.
    4. Léa Marchal & Claire Naiditch & Betül Simsek, 2022. "How Foreign Aid Affects Migration: Quantifying Transmission Channels," Documents de travail du Centre d'Economie de la Sorbonne 22022, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    5. Marchal, Léa & Naiditch, Claire & Simsek, Betül, 2021. "Managing Migration Flows Through Foreign Aid," ILE Working Paper Series 46, University of Hamburg, Institute of Law and Economics.
    6. Marina-Selini Katsaiti & Maroula Khraiche, 2023. "Does access to credit alter migration intentions?," Empirical Economics, Springer, vol. 65(4), pages 1823-1854, October.
    7. Ludolph, Lars & Sedova, Barbora, 2021. "Global food prices, local weather and migration in Sub-Saharan Africa," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242334, Verein für Socialpolitik / German Economic Association.

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