Uncertainty, Citizenship & Migrant Saving Choices

In most Western countries, migrants hold significantly less wealth than natives. Migrants also face significantly more uncertainty about their future. This paper examines the central role of uncertainty over citizenship prospects and future location in explaining their saving choices. Exploiting quasi-experimental variation and panel data from Germany, I show that migrants with a right to citizenship save as much as comparable natives, while migrants without this right save 30% less. This unexplained gap is closed completely when migrants in the latter group gain access to citizenship. The effect is not driven by changes in resources, but rather willingness to save. While standard theory predicts that saving increases in uncertainty, I show that the effect can reverse if utility is state-dependent, malleable, or resources are not equally accessible across states. I build a life-cycle saving model with uncertain retirement location and heterogeneous country preferences. The model shows that agents can have a “preparatory saving motive” that decreases in uncertainty. I confirm the importance of this novel motive empirically, showing that migrants become significantly more likely to invest in illiquid assets if they gain certainty about their right to stay.