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Migration and Cross-Border Financial Flows

  • Kugler, Maurice

    ()

    (United Nations Development Programme (UNDP))

  • Levintal, Oren

    ()

    (Bar-Ilan University)

  • Rapoport, Hillel

    ()

    (Paris School of Economics)

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.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7548.

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Length: 31 pages
Date of creation: Aug 2013
Date of revision:
Handle: RePEc:iza:izadps:dp7548
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  1. Aviat, Antonin & Coeurdacier, Nicolas, 2007. "The geography of trade in goods and asset holdings," Journal of International Economics, Elsevier, vol. 71(1), pages 22-51, March.
  2. Javorcik, Beata S. & Özden, Çaglar & Spatareanu, Mariana & Neagu, Cristina, 2011. "Migrant networks and foreign direct investment," Journal of Development Economics, Elsevier, vol. 94(2), pages 231-241, March.
  3. James E. Rauch & Vitor Trindade, 1999. "Ethnic Chinese Networks in International Trade," NBER Working Papers 7189, National Bureau of Economic Research, Inc.
  4. Richard Portes & Helene Rey, 1999. "The Determinants of Cross-Border Equity Flows," NBER Working Papers 7336, National Bureau of Economic Research, Inc.
  5. Docquier, Frédéric & Rapoport, Hillel, 2011. "Globalization, Brain Drain and Development," IZA Discussion Papers 5590, Institute for the Study of Labor (IZA).
  6. Gould, David M, 1994. "Immigrant Links to the Home Country: Empirical Implications for U.S. Bilateral Trade Flows," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 302-16, May.
  7. Philippe Martin & H=E9l=E8ne Rey=, 2001. "Financial Super-Markets: Size Matters for Asset Trade," International Finance 0012001, EconWPA.
  8. Agrawal, Ajay & Kapur, Devesh & McHale, John & Oettl, Alexander, 2011. "Brain drain or brain bank? The impact of skilled emigration on poor-country innovation," Journal of Urban Economics, Elsevier, vol. 69(1), pages 43-55, January.
  9. Combes, Pierre-Philippe & Lafourcade, Miren & Mayer, Thierry, 2005. "The trade-creating effects of business and social networks: evidence from France," Journal of International Economics, Elsevier, vol. 66(1), pages 1-29, May.
  10. Eichengreen, Barry & Mehl, Arnaud & Chiţu, Livia, 2012. "History, gravity and international finance," Working Paper Series 1466, European Central Bank.
  11. Marc Flandreau, 2006. "Home Biases, Nineteenth Century Style," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 634-643, 04-05.
  12. Keith Head & John Ries, 1998. "Immigration and Trade Creation: Econometric Evidence from Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 31(1), pages 47-62, February.
  13. Rauch, J E & Casella, Alessandra, 2001. "Overcoming Informational Barriers to International Resource Allocation: Prices and Ties," University of California at San Diego, Economics Working Paper Series qt2k8626fr, Department of Economics, UC San Diego.
  14. repec:spo:wpecon:info:hdl:2441/c8dmi8nm4pdjkuc9g708pipbp is not listed on IDEAS
  15. Kugler, Maurice & Rapoport, Hillel, 2007. "International labor and capital flows: Complements or substitutes?," Economics Letters, Elsevier, vol. 94(2), pages 155-162, February.
  16. Robert C. Feenstra & Robert E. Lipsey & Haiyan Deng & Alyson C. Ma & Hengyong Mo, 2005. "World Trade Flows: 1962-2000," NBER Working Papers 11040, National Bureau of Economic Research, Inc.
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