Migration Costs and Networks: household optimal investment in migration
AbstractInternational 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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Bibliographic InfoPaper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number wp867.
Date of creation: Feb 2013
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Find related papers by JEL classification:
- O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
- J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
- J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-03-02 (All new papers)
- NEP-MIG-2013-03-02 (Economics of Human Migration)
- NEP-SOC-2013-03-02 (Social Norms & Social Capital)
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