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Migration Costs and Networks: household optimal investment in migration

  • A. Gentili

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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  8. Elizabeth Fussell & Douglas Massey, 2004. "The limits to cumulative causation: International migration from Mexican Urban Areas," Demography, Springer, vol. 41(1), pages 151-171, February.
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  12. Konseiga, Adama, 2005. "Household Migration Decisions as Survival Strategy: The Case of Burkina Faso," IZA Discussion Papers 1819, Institute for the Study of Labor (IZA).
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  14. Woodruff, Christopher & Zenteno, Rene, 2007. "Migration networks and microenterprises in Mexico," Journal of Development Economics, Elsevier, vol. 82(2), pages 509-528, March.
  15. Mario Piacentini, 2008. "Migration Enclaves, Schooling Choices and Social Mobility," Development Working Papers 265, Centro Studi Luca d\'Agliano, University of Milano.
  16. Mckenzie, David & Rapoport, Hillel, 2007. "Network effects and the dynamics of migration and inequality: Theory and evidence from Mexico," Journal of Development Economics, Elsevier, vol. 84(1), pages 1-24, September.
  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.
  18. Sanjeev Goyal, 2007. "Introduction to Connections: An Introduction to the Economics of Networks
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  19. Pia M. Orrenius, 1999. "The role of family networks, coyote prices and the rural economy in migration from Western Mexico: 1965-1994," Working Papers 9910, Federal Reserve Bank of Dallas.
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