Informal Credit Markets, Interlinkage and Migration
AbstractThis paper develops a model of interlinkage in the credit market and labor market. A credit-cum-labor contract provides the necessary funds to undertake an investment in migration, given the absence of sufficient collateral. The optimal interlinked contract eliminates the scope for strategic default. The result shows that the very presence of inequality is a necessary condition for migration to take place. This could explain the apparent paradox of why poor households in villages where asset distribution is very skewed are more likely to migrate than households in poorer villages with less unequal asset distribution.
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Bibliographic InfoPaper provided by Economics and Finance Section, School of Social Sciences, Brunel University in its series Public Policy Discussion Papers with number 02-23.
Length: 28 pages
Date of creation: Jul 2002
Date of revision:
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Postal: Brunel University, Uxbridge, Middlesex UB8 3PH, UK
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