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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. Docquier, Frédéric & Rapoport, Hillel, 2003. "Remittances and Inequality: A Dynamic Migration Model," IZA Discussion Papers 808, Institute for the Study of Labor (IZA).
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  10. Antonio Spilimbergo & Gordon H. Hanson, 1999. "Illegal Immigration, Border Enforcement, and Relative Wages: Evidence from Apprehensions at the U.S.-Mexico Border," American Economic Review, American Economic Association, vol. 89(5), pages 1337-1357, December.
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  17. 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.
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