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The impact of liquidity constraints and imperfect commitment on migration decisions of offspring of rural households

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  • Matthieu Delpierre

Abstract

This paper presents a non-cooperative model of intra-household decision-making regarding investment in migration. It is shown that the combination of liquidity constraints and imperfect commitment are a source of underinvestment in migration. More precisely, we highlight that, if remittances are unenforceable as a repayment for parent?s contribution in migration transaction costs, then both migrant and parent?s liquidity constraints, rather than households liquidity constraint as a whole, matter in determining the investment decision. Besides, the insurance motive for remittances is shown to generate divergence of interest over the characteristics of migration. This result calls for a theoretical approach that properly takes account of potential internalization problems, which the paper intends to offer. Plausibility checks of the model are provided by comparative statics whose outcomes are consistent with previous research on migration and remittances.
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  • Matthieu Delpierre, 2012. "The impact of liquidity constraints and imperfect commitment on migration decisions of offspring of rural households," Review of Economics of the Household, Springer, vol. 10(1), pages 153-170, March.
  • Handle: RePEc:kap:reveho:v:10:y:2012:i:1:p:153-170
    DOI: 10.1007/s11150-010-9113-2
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    1. Matthieu Delpierre, 2012. "The impact of liquidity constraints and imperfect commitment on migration decisions of offspring of rural households," Review of Economics of the Household, Springer, vol. 10(1), pages 153-170, March.
    2. Nandy, Amarendu & Tiwari, Chhavi & Kundu, Sayantan, 2021. "India’s Rural Employment Guarantee Scheme – How does it influence seasonal rural out-migration decisions?," Journal of Policy Modeling, Elsevier, vol. 43(6), pages 1181-1203.
    3. Samuel Bazzi, 2017. "Wealth Heterogeneity and the Income Elasticity of Migration," American Economic Journal: Applied Economics, American Economic Association, vol. 9(2), pages 219-255, April.

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    More about this item

    Keywords

    Migration; liquidity constraints; Remittances; Mutual Insurance; D13; D81; O12; O15;
    All these keywords.

    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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