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Migration Costs and Networks: household optimal investment in migration

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  • A. Gentili

Abstract

International migration is an expensive form of investment, that only households relatively better off can afford. However poorer households have the higher incentive to migrate. Migration decision is conditional on the entry cost, expected returns and risks of migration. This paper, using data from Mexican rural and urban areas, examines the relation between household and community networks and costs and risks of migration focusing on the optimal investment in migration. To investigate an household optimal number of migrants this paper introduces a Three Step procedure to solve simultaneously for the endogeneity of network size and possible selection of migrants. The analysis confirms the inverted U-shaped relation between wealth and migration, stressing the importance of networks particularly in facilitating the migration of social strata belonging to the left tail of the income distribution. Moreover, in presence of sunk costs and/or high initial investment, household and community networks accomplish different functions.

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Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number wp867.

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Date of creation: Feb 2013
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Handle: RePEc:bol:bodewp:wp867

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  1. George J. Borjas, 1987. "Self-Selection and the Earnings of Immigrants," NBER Working Papers 2248, National Bureau of Economic Research, Inc.
  2. David Mckenzie & Hillel Rapoport, 2004. "Network Effects and the Dynamics of Migration and Inequality: Theory and Evidence from Mexico," Working Papers 2004-3, Department of Economics, Bar-Ilan University.
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  9. Gordon H. Hanson & Antonio Spilimbergo, 1996. "Illegal Immigration, Border Enforcement, and Relative Wages: Evidence from Apprehensions at the U.S.-Mexico Border," Research Department Publications 4036, Inter-American Development Bank, Research Department.
  10. Frédéric Docquier & Hillel Rapoport, 2003. "Remittances and Inequality: A Dynamic Migration Model," Working Papers 2003-05, Department of Economics, Bar-Ilan University.
  11. Adama Konseiga, 2007. "Household Migration Decisions as Survival Strategy: The Case of Burkina Faso," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 16(2), pages 198-233, March.
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  14. Borjas, George J, 1985. "Assimilation, Changes in Cohort Quality, and the Earnings of Immigrants," Journal of Labor Economics, University of Chicago Press, vol. 3(4), pages 463-89, October.
  15. Ghatak, Subrata & Levine, Paul & Price, Stephen Wheatley, 1996. " Migration Theories and Evidence: An Assessment," Journal of Economic Surveys, Wiley Blackwell, vol. 10(2), pages 159-98, June.
  16. Woodruff, Christopher & Zenteno, Rene, 2007. "Migration networks and microenterprises in Mexico," Journal of Development Economics, Elsevier, vol. 82(2), pages 509-528, March.
  17. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-42, March.
  18. Pia M. Orrenius, 1999. "The role of family networks, coyote prices and the rural economy in migration from Western Mexico: 1965-1994," Working Papers 9910, Federal Reserve Bank of Dallas.
  19. George J. Borjas, 1994. "The Economics of Immigration," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1667-1717, December.
  20. Barry Chiswick, 1999. "Are Immigrants Favorably Self-Selected?," American Economic Review, American Economic Association, vol. 89(2), pages 181-185, May.
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