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The Impact of Liquidity Constraints and Imperfect Commitment on Migration Decisions of Offspring of Rural Households

  • Matthieu Delpierre

    ()

    (Earth and Life Institute, Universite Catholique de Louvain)

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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File URL: http://www.fundp.ac.be/eco/economie/recherche/wpseries/wp/1011.pdf
File Function: First version, 2010
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Paper provided by University of Namur, Department of Economics in its series Working Papers with number 1011.

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Length: 29 pages
Date of creation: Oct 2010
Date of revision:
Handle: RePEc:nam:wpaper:1011
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  1. Rapoport, Hillel & Docquier, Frédéric, 2005. "The Economics of Migrants’ Remittances," IZA Discussion Papers 1531, Institute for the Study of Labor (IZA).
  2. Kaushik Basu, 2004. "Gender and Say A Model of Household Behavior with Endogenously-determined Balance of Power," Harvard Institute of Economic Research Working Papers 2054, Harvard - Institute of Economic Research.
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  4. Calero, Carla & Bedi, Arjun S. & Sparrow, Robert, 2008. "Remittances, Liquidity Constraints and Human Capital Investments in Ecuador," IZA Discussion Papers 3358, Institute for the Study of Labor (IZA).
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  6. Edwards, Alejandra Cox & Ureta, Manuelita, 2003. "International migration, remittances, and schooling: evidence from El Salvador," Journal of Development Economics, Elsevier, vol. 72(2), pages 429-461, December.
  7. Catalina Amuedo-Dorantes & Susan Pozo, 2011. "New evidence on the role of remittances on healthcare expenditures by Mexican households," Review of Economics of the Household, Springer, vol. 9(1), pages 69-98, March.
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  11. Bernheim, B Douglas & Shleifer, Andrei & Summers, Lawrence H, 1985. "The Strategic Bequest Motive," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1045-76, December.
  12. Cox, Donald & Eser, Zekeriya & Jimenez, Emmanuel, 1998. "Motives for private transfers over the life cycle: An analytical framework and evidence for Peru," Journal of Development Economics, Elsevier, vol. 55(1), pages 57-80, February.
  13. Sinning, Mathias, 2007. "Determinants of Savings and Remittances: Empirical Evidence from Immigrants to Germany," IZA Discussion Papers 2966, Institute for the Study of Labor (IZA).
  14. Brown, Richard P. C., 1997. "Estimating remittance functions for Pacific Island Migrants," World Development, Elsevier, vol. 25(4), pages 613-626, January.
  15. Hoddinott, John, 1994. "A Model of Migration and Remittances Applied to Western Kenya," Oxford Economic Papers, Oxford University Press, vol. 46(3), pages 459-76, July.
  16. Chiappori, Pierre-Andre, 1992. "Collective Labor Supply and Welfare," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 437-67, June.
  17. Matthieu Delpierre, 2010. "The Impact of Liquidity Constraints and Imperfect Commitment on Migration Decisions of Offspring of Rural Households," Working Papers 1011, University of Namur, Department of Economics.
  18. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
  19. de la Briere, Benedicte & Sadoulet, Elisabeth & de Janvry, Alain & Lambert, Sylvie, 2002. "The roles of destination, gender, and household composition in explaining remittances: an analysis for the Dominican Sierra," Journal of Development Economics, Elsevier, vol. 68(2), pages 309-328, August.
  20. Larson, Donald & Mundlak, Yair, 1997. "On the Intersectoral Migration of Agricultural Labor," Economic Development and Cultural Change, University of Chicago Press, vol. 45(2), pages 295-319, January.
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  22. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 661465000000000387, David K. Levine.
  23. Stark, Oded & Levhari, David, 1982. "On Migration and Risk in LDCs," Economic Development and Cultural Change, University of Chicago Press, vol. 31(1), pages 191-96, October.
  24. Coate, Stephen & Ravallion, Martin, 1993. "Reciprocity without commitment : Characterization and performance of informal insurance arrangements," Journal of Development Economics, Elsevier, vol. 40(1), pages 1-24, February.
  25. Alejandra Cox Edwards & Manuelita Ureta, 2003. "International Migration, Remittances, and Schooling: Evidence from El Salvador," NBER Working Papers 9766, National Bureau of Economic Research, Inc.
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  27. Browning, Martin & Francois Bourguignon & Pierre-Andre Chiappori & Valerie Lechene, 1994. "Income and Outcomes: A Structural Model of Intrahousehold Allocation," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1067-96, December.
  28. Frances Woolley, 2000. "Control over Money in Marriage," Carleton Economic Papers 00-07, Carleton University, Department of Economics, revised 2003.
  29. Lucas, Robert E B & Stark, Oded, 1985. "Motivations to Remit: Evidence from Botswana," Journal of Political Economy, University of Chicago Press, vol. 93(5), pages 901-18, October.
  30. Todaro, Michael P, 1969. "A Model for Labor Migration and Urban Unemployment in Less Developed Countries," American Economic Review, American Economic Association, vol. 59(1), pages 138-48, March.
  31. Funkhouser, Edward, 1995. "Remittances from International Migration: A Comparison of El Salvador and Nicaragua," The Review of Economics and Statistics, MIT Press, vol. 77(1), pages 137-46, February.
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