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Migration and Cross-Border Financial Flows

Author

Listed:
  • Maurice Kugler

    () (UNDP)

  • Oren Levintal

    (Department of Economics, Bar-Ilan University)

  • Hillel Rapoport

    (Paris School of Economics, University Paris 1 Pantheon-Sorbonne)

Abstract

The gravity model has provided a tractable empirical framework to account for bilateral flows not only of manufactured goods, as in the case of merchandise trade, but also of financial flows. In particular, recent literature has emphasized the role of information costs in preventing larger diversification of financial investments. This paper investigates the role of migration in alleviating information imperfections between home and host countries. We show that the impact of migration on financial flows is strongest where information problems are more acute (that is, for more informational sensitive investments and between more culturally distant countries) and for the type of migrants that are most able to enhance the flow of information, namely, skilled migrants. We interpret these differential effects as additional evidence pointing to the role of information in generating home-bias and as new evidence of the role of migration in reducing information frictions between countries.

Suggested Citation

  • Maurice Kugler & Oren Levintal & Hillel Rapoport, 2013. "Migration and Cross-Border Financial Flows," CReAM Discussion Paper Series 1317, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  • Handle: RePEc:crm:wpaper:1317
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    References listed on IDEAS

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    Cited by:

    1. repec:eme:ijmpps:v:37:y:2016:i:7:p:1209-1226 is not listed on IDEAS
    2. Hillel Rapoport, 2016. "Migration and globalization: what’s in it for developing countries?," International Journal of Manpower, Emerald Group Publishing, vol. 37(7), pages 1209-1226, October.
    3. Lücke, Matthias & Stöhr, Tobias, 2015. "Heterogeneous immigrants and foreign direct investment: The role of language skills," Kiel Working Papers 2009, Kiel Institute for the World Economy (IfW).
    4. Donaubauer, Julian & Glas, Alexander & Nunnenkamp, Peter, 2015. "Infrastructure and trade: A gravity analysis for major trade categories using a new index of infrastructure," Kiel Working Papers 2016, Kiel Institute for the World Economy (IfW).
    5. Ademmer, Esther & Barsbai, Toman & Lücke, Matthias & Stöhr, Tobias, 2015. "30 Years of Schengen: Internal blessing, external curse?," Kiel Policy Brief 88, Kiel Institute for the World Economy (IfW).
    6. Etzo, Ivan & Takaoka, Sumiko, 2016. "The impact of migrants on the cross-border M&A: Some evidence for Japan," MPRA Paper 71558, University Library of Munich, Germany.
    7. Volker Grossmann, 2016. "How immigration affects investment and productivity in host and home countries," IZA World of Labor, Institute for the Study of Labor (IZA), pages 292-292, September.

    More about this item

    Keywords

    Migration; international financial flows; international loans; gravity models; information asymmetries;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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