Financing Migration or Development? The Political Economy of Credit & Migration

• In Event: Political Economy of Migration: Driving Policies and Destabilization

Abstract

Access to credit is an important tool for development. For potential migrants, however, it can have ambiguous effects. On the one hand, newfound resources might help to finance migration costs in hope for better returns abroad. On the other hand, new resources also provide funds to invest locally, thus reducing incentives to emigrate. We argue that which of these effects dominate depends on the skill endowment of potential migrants as well as on the level of development of their home country. We empirically test our theory by analyzing migration flows to the US from 1988 to 2015. Our findings emphasize the role of credit constraints and its differential effects on migration decisions; in particular, they highlight the potential heterogeneous and unintended consequences of international financial flows for international migration, thus adding to our understanding on the role of finance for both migration and development.

Authors

• Ernesto Arias, Independent Researcher

• Benjamin Clay Helms, University of Virginia